Progressive Ponderings: Financial Crisis Musings

By Joe Mayer

Although finger pointing and scapegoating is abundant among economists, financiers and politicians, there is agreement that the housing/mortgage bust triggered our current financial crisis. Yet the free-marketer, Treasury Secretary Henry Paulson, is idealistically and psychologically incapable of addressing the crisis from the view of millions of homeowners facing foreclosure, bankruptcy, eviction and psychological trauma. Modifying loans for distressed homeowners to avoid foreclosure would bring price stability to the housing market and provide banks a solid number in evaluating their loan portfolios. This would re-establish trust in the markets — sorely needed to heal the credit crisis. Could it be that, as a former Wall Street CEO, Paulson believes that recognizing homeowners' pain will reveal the mortgage industry's role in causing the crisis?

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Crises provide opportunities. Naomi Klein, in her book "Shock Doctrine," describes multiple examples of Milton Friedman and the Chicago School of Economics using "crises" or "shocks" around the globe as opportunities to move in and implant unrestricted free-market capitalism as a "cure." This current worldwide financial crisis is at least partially the result of Chicago School economics. It planted the corporate market structure in the place of government. Thus, democracy was replaced in country after country by a repressive globalization that took orders from the corporate world. Today's crisis has renewed a call for greater democracy. People are crying for change – change in government priorities and change in economic policies that favor wealth over humanity. The "right," refusing to acknowledge the market's role in creating this disaster, plans to leave everything in place, which will enable the next crisis. Progressives must use this crisis and the populism it created to provide a basis for real change. Elections aren't sufficient. They don't necessarily change structures. Only continued involvement and pressure by millions of citizens can effect the "change we can believe in."

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"It happened." That was George Bush's answer when asked about the financial crisis. He might as well have said "it fell out of the sky" or "it's the result of the natural law of economics." By admitting no cause for the crisis or flaws in our financial system, no blame is attached. No blame, no analysis of underlying causes, and then no need for structural change. If one doesn't admit to cause and effect then it makes perfect sense to administer the bailout with the same people who caused it. The fox is in the chicken house handing out billions of our money to fellow foxes.

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Wall Street executives, conservatives and politicians of all stripes seem to know the cause of the crisis in the American auto industry. "It's those damn unions. How dare blue collar workers participate in the American dream?" As the CEOs of the Big Three testified before Congress they were treated with contempt (with some justification), criticized for flying into D.C. on company jets and lectured regarding their wages, bonuses and perks. In contrast, when Wall Street CEOs, creators of the Ponzi mortgage scheme, approached Congress, they were treated with awe (and no justification) for the money they represented. No one questioned how they arrived in D.C. "Would you be so kind as to possibly trim your bonus this year?" was the prevailing homage attitude. No demands for change were made to the Wall Street tycoons who lavish money on both sides of the political isle. But Main Street industry must beg for a fraction of the financial bailout even though millions of jobs are at stake throughout the economy. Congressional hearings are for political posturing, not for solving problems.