Gloom Ahead of World Economic Storm

Published by Anonymous (not verified) on Fri, 18/01/2019 - 2:01am in

By Jomo Kwame Sundaram and Anis Chowdhury

Cross-posted at Inter Press Service.

In light of the uncertainty caused by the US-China trade war, the IMF expects the US economic growth to slow from a three-year high of 2.9 per cent in 2018 to 2.5 per cent in 2019, while China’s expansion has already slowed in recent years, albeit from much higher levels.

Trump stimulus dissipates
US President Trump and the previous GOP-controlled US Congress claimed to be breathing new life into the US economy with generous tax cuts. The US economy is now overheating, with inflation rising above target, causing the Federal Reserve to continue raising the federal funds rate to dampen demand.

As most families hardly gained from the tax changes, US purchases of houses and consumer durables continued to decline through 2018. Instead of investing in expanding productive capacity, US companies spent much of their tax savings on a $1.1 trillion stock buy-back spree in 2018.

Hence, the positive impacts of tax cuts were not only modest, but are also diminishing. Nearly half of 226 US chief financial officers recently surveyed believe that the US will go into recession by the end of 2019, with 82 per cent believing that it will have begun by the end of 2020. Wall Street’s biggest banks, JP Morgan and Bank of America, are also preparing for a slowdown in 2019.

As if to confirm their concerns, both the Dow Jones Industrial Average and the S&P 500 had their worst ever December performance since 1931, when stocks were battered after the Great Crash.

European recession

Meanwhile, the European Central Bank is expecting sluggish 1.7 per cent regional growth in 2019. Europe is close to recession with the collapse of industrial output in Germany, France, UK and Italy.

Germany’s industrial output fell by 1.9 per cent month-on-month in November 2018, and was in negative territory in 5 of the 6 months before December. Its GDP fell by 0.2 per cent in the 3rd quarter of 2018. France’s industrial production fell 1.3 per cent in November 2018, reversing a 1.3 per cent growth recovery in October from a 1.7 per cent decline in September. Italy, Europe’s third largest economy, recorded negative growth in the 3rd quarter of 2018 as GDP fell by 0.1 per cent in July-September 2018 with weaker domestic demand.

As the UK remains mired in its Brexit mess, GDP growth was dragged down to 0.3 per cent in the three months to November with the biggest industrial output contraction since 2012. 2018 final quarter growth is expected to be 0.1 per cent, i.e., negligible.

Not preparing for the inevitable?
David Lipton, the first deputy managing director of the IMF, warned in early January 2019, “The next recession is somewhere over the horizon, and we are less prepared to deal with that than we should be . . . [and] less prepared than in the last [crisis in 2008].”

Although the IMF had projected 3.7 per cent global economic growth for 2019 in October 2018, Lipton’s statement suggests that the IMF is likely to revise its 2019 growth forecast downward.

There have also been growing concerns over the continued efficacy of unconventional monetary policy since the 2008-2009 global financial crisis (GFC). Undoubtedly, countries now have less fiscal space than in 2009, and overall borrowing, including public debt has risen since.

Reaping what you sow

The policy blunders since the GFC have only made things much worse. The ideologically driven case for fiscal consolidation did not boost investor confidence for a robust recovery, as promised.

Despite acknowledging false claims cited to justify fiscal consolidation, including the IMF’s admission that its early advice was based on faulty calculations, there was no recommended change in policy course.

Instead, all responsibility for recovery was put on the monetary authorities who resorted to unconventional policies, especially ‘quantitative easing’ (QE). However, the global economic recovery since then has remained tepid and easily reversible.

Additional liquidity, made available by QE, has largely been used to buy financial assets and for speculation, amplifying the financial vulnerability of emerging market economies, which have experienced increased volatility.

Governments also failed to take advantage of historically low, even negative real interest rates to borrow and invest to boost productive capacity in the longer term.

By mainly benefiting financial asset holders, QE has exacerbated wealth concentration. Meanwhile, cuts in public services and social spending have worsened social polarization, as tax cuts for the rich have failed to generate promised additional investments and jobs growth.

The failure to achieve a robust recovery has not only worsened the debt situation, but also made lives harder for ordinary people. Growing polarization has also worsened resentments, eroding trust, undermining solidarity and progressive alternatives.

Ethno-populist jingoism undermines cooperation

But lack of preparedness can hardly be due to ignorance as there have been many such predictions recently, certainly more than in 2007-2008, before the GFC.

The cooperation that enabled co-ordinated actions to prevent the Great Recession from becoming a depression has not only waned, but major countries are now at loggerheads, preventing collective action.

National political environments are also more hostile. In Europe, the rise of ethno-populist nationalism is making it harder to pursue EU-level policies and to act together to prevent and mitigate the next financial crisis and downturn.

The “new sovereigntists” and false prophets of American exceptionalism are undermining multilateral cooperation when needed most. Thus, a recession in 2019 may well elevate geo-political tensions, exacerbating the negative feedback loop for a ‘perfect storm’.

Anis Chowdhury, Adjunct Professor at Western Sydney University and the University of New South Wales (Australia), held senior United Nations positions in New York and Bangkok.

Jomo Kwame Sundaram, a former economics professor, was United Nations Assistant Secretary-General for Economic Development, and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought in 2007.

SYNDICATED COLUMN: George H.W. Bush Hagiography is the Elites’ Finest Accomplishment

Published by Anonymous (not verified) on Tue, 04/12/2018 - 9:58am in

Image result for highway of death

Even by the recent can’t-believe-your-eyes-and-ears standards of American elitist hagiography this week’s over-the-top-of-the-top praise of George H.W. Bush was astonishing.

What separated Bush41apalooza from such previous pseudo-griefathons as those for Ronald Reagan and John McCain was that there was so little to work with. Not that it stopped the media.

I knew this was an insane historical benchmark when a major network interrupted its coverage of the G-20 summit with the BREAKING NEWS that George W. Bush had issued a statement about his dead dad: “George H.W. Bush was a man of the highest character and the best dad a son or daughter could ask for.” Stop the presses!

When a right-wing Republican like Bush dies you can count on a Democrat to deliver his most fulsome praise. “America has lost a patriot and humble servant,” said Barack and Michelle Obama. “While our hearts are heavy today, they are also filled with gratitude…George H.W. Bush’s life is a testament to the notion that public service is a noble, joyous calling. And he did tremendous good along the journey.”

Trump lies constantly but it took the death of Bush 41 for American “leaders” and their media mouthpieces to fully commit to speaking an English language whose words have no meaning whatsoever. In this dystopia I’d call Orwellian save for the fact that old George’s prophecy didn’t anticipate its hilarious absurdity, a man who ran for president three times qualifies as “humble.” A commander-in-chief who ordered the massacre of tens of thousands of innocent people in one of the most gruesome war crimes ever recorded—the “Highway of Death” following the ceasefire that ended the Gulf War—is described as having great character—yet no one upchucks all over the camera lens as if it were a Japanese prime minister.

A steward of the economy who refused to stimulate a tide or raise any boats in the middle of a brutal six-year-long recession can be called many things but not—before the Obamas—“joyous.” Preppy, I’ll give you. Joyous, no.

John Sununu, Bush’s chief of staff, explained in 1991, that doing “tremendous good” was actually contrary to Bush’s governing philosophy: “The President feels very strongly that the free-market system operates best when it does not have its hands tied by government, is not shackled by a system that erroneously thinks it can improve it by command and control.” Bush chimed in: “I do not want to see the government pick winners and losers.” Except his government did create losers: his refusal to fund AIDS research killed tens of thousands of gay men.

I’m in favor of behavioral change,” Bush said to justify his policy, a brazen sop to the Christian Right. “Here’s a disease where you can control its spread by your own personal behavior.” Memo to gays: don’t have sex. So “joyous.” So much “tremendous good.” Guess we’ll never get that apology now.

Fawning over dead presidents and the occasional dead presidential candidate is always repugnant considering they’re such a callous and bloodthirsty lot of greed-dogs. But Bush 41—his death dance is different.

Like him or not, Reagan was a consequential person with undeniable political acumen. Even under Democrats Clinton and Obama we have continued to accept the Gipper’s redefinition of the social contract from a culture of looking out for one another to every man for himself. His easy aw-shucks vocal delivery made the most liberal voters sleep through eight years of budgetary, tax and military mayhem—no easy feat.

Likewise John McCain was a deeply—mostly—flawed man who nonetheless had enough of an engaging story, his experience as a POW in Vietnam, for the hagiographers to blow up into a fairly credible heroism narrative, overcoming the uncomfortable fact that the war he volunteered to kill in is understood to have been immoral and illegal.

Bush, on the other hand, has always been a former president universally understood to be a do-nothing failure. Screwed up the economy, set the stage for his son’s Iraq War, refused to turn post-Cold War Russia into a friend and ally, preferring to watch the former USSR plunge into chaos and mass starvation so his big banker backers could swarm in and loot state-owned enterprises. You could call him the Republican Jimmy Carter but Bush—unlike Carter—was never rehabilitated by history or the electorate. Whereas Carter (actually humbly) dedicated himself to Habitat for Humanity during his long post-presidency and so earned respect, Bush 41 just—what? Showed up for presidential reunion photo-ops? He just nothinged. Even Republicans didn’t much care for him.

Were you surprised that Bush died because you didn’t know he was still alive?

There was once a time when, when presidents died, you imagined that at least some of the network news talking heads believed some of what they read to you, that some of the mawkish tributes were heartfelt. No more.

The fakery is so phony they don’t even bother to hide it anymore.

Like Winston Smith at the conclusion of “1984,” the bullet in the back of the rotting head of BS American democracy comes almost as a release.

(Ted Rall (Twitter: @tedrall), the political cartoonist, columnist and graphic novelist, is the author of “Francis: The People’s Pope.” You can support Ted’s hard-hitting political cartoons and columns and see his work first by sponsoring his work on Patreon.)



The Myth of the Robust Deregulated Economy

Published by Anonymous (not verified) on Mon, 26/11/2018 - 8:43pm in

[Published at Pearls and Irritations 3 Dec 18]

The economic ‘reforms’ of the 1980s are supposed to have set Australia up for an unprecedented run of prosperity: 27 years, and counting, without a recession. The economy’s robustness is supposed to have saved us from the Global Financial Crisis. In fact our economy has been unstable, and its performance has been mediocre verging on anaemic. Any appearance of robust prosperity is due to a huge run-up of debt, some direct intervention, high immigration, overwork, selective blindness and over-active imaginations.

“Just think how the old Australia – the over-regulated, overprotected and inflation-prone Australia – would have coped with the global financial crisis a decade ago” gushed Tom Switzer of the Centre for Independent Studies in a recent column. Australia made the cover of a recent Economist, and George Megalogenis did a book and a TV series on it (I have critiqued Megalogenis’ claims before). The mantra has been relentless since 1983.

What a shame such a seductive story turns out to be a flimsy confection.

That dreadful “old” Australia, presided over, we should remember, by that pinko Bob Menzies, achieved average annual GDP growth exceeding 5% and unemployment averaging a minuscule 1.3%. Nowadays such numbers are considered impossible, guaranteed to bring on raging inflation, but inflation averaged a moderate 3.3%. The contrast was documented over 20 years ago by Stephen Bell (Ungoverning the Economy, 1997). The post-1983 neoliberal economy has never come close to this performance, with GDP growth around 3%, unemployment rarely below 5% and inflation in the 2-3% range.

Ah, but what about the 1970s, you may be thinking? There was Whitlam, stagflation, global chaos and the disastrous demise of the Keynesian era. Yes, what about them? First of all, the price of oil quadrupled, so of course economies struggled. That’s the stagnation part of stagflation. The US went off the gold standard and tried to pay for its Vietnam war by printing money. That’s a large part of the inflation component of stagflation. If there was a wage-price spiral also contributing to inflation, that was the doing of unions and bosses – it takes two to tango. But you have to count the US contribution to inflation before you lay any remaining blame elsewhere.

It was quite disingenuous of neoliberal campaigners to blame the difficulties of the 1970s on Keynesian management and, locally, Whitlam. As to Whitlam’s much-derided economic management, Australia was the only OECD country to avoid recession in the 1970s too, and the UK and US recessions were severe. So the Whitlam years were not quite the unmitigated disaster they are commonly portrayed as.

What about the alleged stability of the modern economy, its ability to ride-out financial crises? Neoliberal deregulation caused both Australia’s and the world’s worst recessions since the Great Depression.

Banks make most of their money by ‘loaning’ money. (They create the money they ‘loan’ with a few keystrokes, but that’s another story.) When the Hawke-Keating government deregulated Australia’s banks the banks competed to throw money at ‘entrepreneurs’ – people like Alan Bond and Christopher Skase. There was a huge run-up of private business debt. The economy boomed along with much cheering from the breathless commentariat. But then the debt bubble burst, precipitating the Keating recession of the early 1990s, the worst since the 1930s and a recession we did not have to have.

The deregulated global financial system was also having the odd hiccup. There was the 1987 stock market crash, assorted national crises in Mexico, Russia, Brazil and Argentina, the Asian currency meltdown in 1998 and the dot-com bust in 2001. Meanwhile toxic debt was being spread through the global system by unscrupulous, competing financiers. The bursting of that debt bubble brought on the Global Financial Crisis and the ensuing Great Recession (actually a depression in peripheral Europe and parts of the US).

Australia avoided a GFC recession because the Rudd-Swan Government, uniquely in the world, briefly suspended neoliberalism and spent directly into the economy. Yes the mining boom helped, but the short-term timing is clear. Christmas 2008 was gloomy everywhere but here.

Australian business and manufacturing have been hollowed out by a shift towards short-termism and financial speculation. The consequences of this were disguised for a long time by a steady rise in private debt, much of it household mortgage debt, as documented for example by Egan and Soos (Bubble Economics, 2014). We were living on our credit card. Since the capacity to increase debt saturated after the GFC our economy has been increasingly anaemic, and a collapse of the debt bubble remains a clear danger.

The weakness has also been disguised by two other factors. First, an increase in working hours. Second, the high immigration rate, which keeps the GDP expanding (just) though the GDP per capita and median incomes stagnate.

It is not a little gob-smacking that neoliberal apologists can (still) look at this history and extract a story of an economy saved by deregulation. Remember, these are the people who didn’t see the GFC coming, for the basic reason that they exclude debt from their models and minds. It is testimony to the power of faith over evidence.

Australia has suffered long-term damage from this grand, misguided experiment in social engineering. Pauline Hanson got her start in the bitter aftermath of the Keating recession (11% unemployment), just as Trump and various fascist movements have risen from the ashes of the GFC.

We are a divided, unhappy nation and society. People know they have been ripped off by the financial class. Young people can’t afford houses and higher education is increasingly out of reach. People are being priced out of their homes. All the ailments of poverty and disaffection are increasing, including scapegoating. The Abbotts and Duttons have found fertile ground for their fear-mongering.

We are relatively fortunate that mainstream Australians’ patience seems at last to be wearing thin and they are rebelling at the ballot box. Resistance is taking more toxic forms in many other nations.

It is insulting to Australians to call this resistance ‘populism’. The neoliberal experiment has been a disastrous failure and people have been slowly waking up to the nonsense they have been fed, for decades.

Trailer for Mike Leigh’s ‘Peterloo’

The left-wing British film director, Mike Leigh, has a film coming out about the ‘Peterloo Massacre’ in 1819 when a defenceless crowd that had gathered in Manchester to hear the radical politician, Henry ‘Orator’ Hunt, was charged by cavalry.

It was a period of severe economic recession, unemployment, political discontent and stifling censorship of freedom of speech, protest and the press. This passage from The History of the World: The Last 500 Hundred Years, General Editor Esmond Wright (Feltham: Hamlyn 1984) describes the conditions at the time.

At the end of the war England entered upon a long depression which brought to many even greater hardship than the war had done. Industries lay depressed with the sudden cessation of wartime demand, agriculture no longer enjoyed the protection that Napoleon’s blockade had brought and began to contract, while European countries, impoverished after years of conquest and exploitation, could not afford to resume their former level of trade. It was, in fact, twenty years after 1815 before British exports recovered to their previous level. Added to the existing problems of unemployment and low wages were some half a million demobilized soldiers and sailors, suddenly thrown onto a labour market that could not absorb them. The years from 1815 to 1820 were mong the darkest in English history when many feared, with some cause, a repetition of the events which had torn France apart in 1789.

Radicalism – an extreme form of politics which advocated fundamental reform of the constitutional and financial system – grew to brief importance under such popular leaders as Cobbett and Hunt. In their hatred of industrialization they preached a naïve ‘back-to-the-land’ philosophy which seemed attractive to populations of former peasants exposed to the insecurities of town life. Significantly, the cause of the Peterloo Massacre in Manchester in 1819, when a defenceless crowd was charged by squadrons of cavalry, was a speech by Hunt, not on the problem of wages or unemployment, but on the subject of land reform.

Most labour movements in the first half of the century had this strong agrarian background. A majority of the new town dwellers were peasants by origin, unaccustomed to the regularity of factory work and the overcrowded life in slums and tenements. They turned instinctively to solutions that offered simpler, better understood relationship in which men seemed to be something more than mere instruments of production. Working people gave their support to Radicalism, not because they understood or even cared very much about abstract democratic principles but because it represented a protest against the unacceptable conditions of life. To its few middle- and upper-class supporters it was much more – a progressive, democratic demand for a government responsible to the popular will and an administrative system based on efficiency rather than privilege.

To such suggestions the governments of the fay responded with severe repression. The Tory party remained in office from the end of the war until 1830, first under Lord Liverpool, later under the wartime hero, the Duke of Wellington. Their belief was that the British constitution was perfect and that any attempt to disturb it must be put down firmly. Trade unions were illegal until 1824 and even after that striking was still a criminal offence, public meetings and meeting-places required to be licensed and newspapers were subject to a crippling stamp duty of five pence a copy. Together with such measures went a crude system which paid a meagre dole to labourers whose earning were inadequate to support their families (the Speenhamland system of poor relief) and which had the effect of impoverishing whole areas of the country. (p. 396).

This sounds very much like the kind of Britain Tweezer, Bojo, Rees-Mogg and their followers would like to return to us to. A country where unions and strikes are banned, restrictions on public meetings and censorship of the press. Except when it supports the Tories, of course. Blair and Cameron both tried to bring in legislation limiting demonstrations. They’ve been banned within a certain area of parliament, and Cameron wanted to pass legislation outlawing public protests if they caused a nuisance to local residents. Which is a convenient way of suppressing public expressions of dissent while claiming that you aren’t intending to do any such thing. ‘The government is fully behind freedom of speech and assembly, but this will be an intolerable nuisance to the people actually in the area’, is how the argument would run. And they’d also like to see more people slaving away in cruel and exploitative conditions in poverty, with a benefits system totally unable to cope.

Which is what makes Leigh’s movie of such contemporary significance. Here’s the trailer.

I caught a few moments of Leigh being interviewed on the Beeb the week before last. He was talking about how the incident was an important event in Manchester’s history. Walking around the historic part of Manchester, he pointed out buildings that had been there at the time and which had been included in the film.

Leigh’s known for his improvisational approach to film making, but the interviewer said that this movie felt more scripted, and Leigh agreed. I can’t say I’m a fan of Leigh’s work – it’s a bit too grim for my tastes – but this is something I’d like to see. The Peterloo Massacre is nearly 200 years ago, but it still has resonance and immense importance to the early 21st century Britain of Tweezer and the Tories.

The budget, the fragile recovery and the next recession

Published by Anonymous (not verified) on Mon, 22/10/2018 - 3:00am in

I'm not a forecaster. I do macro, and worked for Wynne Godley at the Levy, but I feel that there are too many dangers in forecasting. Wynne was also, btw, more concerned with what he called medium term scenarios, than pinpointing when a recession would take place. The obvious joke applies here. Economists have predicted 10 of the last 9 recessions. Having said that let me do the exact opposite and throw caution to the wind.

So I'm going out on a limb here. Everybody thinks the recession is around the corner. I'm more skeptical. Let me start by looking at what Martin Wolf has said in his last column, since he seems to be close to what consensus views would argue. He resuscitates old views about confidence cycles. For him: "Bull markets, it is said, climb a wall of worry... so much optimism was already in the prices of financial assets — in the US, above all — that once worry returned they had nowhere to go but down." He suggests that a "jump in risk aversion" might trigger the recession.

Worse, he suggests, following the IMF (that has changed its mind, according to many), that the US government has not helped by embarking on a highly irresponsible, pro-cyclical fiscal expansion on top of what the IMF labels 'already unsustainable debt dynamics'." In other words, expansionary fiscal policy will promote a crash by sapping the confidence of financial markets. Presumably we need sound finance.
The worst risk for him comes from populism, particularly in the US. He notes:

"The biggest shift of all is in the US. Last week, President Donald Trump broke a longstanding taboo by condemning recent tightening by the Federal Reserve. Under him, the US has also embarked on an assault on the World Trade Organization’s dispute settlement system and an open-ended trade war with China."

As I noted in my previous post on this, the biggest risk in my view comes from monetary policy in the context of a relatively fragile and slow recovery, even if it is a very prolonged one. The yield curve (see below; I use the Fed Funds and the 10 year bond rather than the 10-2 spread, since the Fed Funds is more clearly a policy rate, and gives you the result of policy actions) is closing, but if the Fed does not raise the basic rate too fast, there is a chance for the slow expansion to continue.

Note that there are other indicators that suggest that even though the recovery is not great, it may continue for a while. For example, if one looks at Gross Fixed Capital Formation, it is clear that an initial downturn seems to have subsided (like in the mid-1980s), and that the system got a second wind.

Capacity Utilization in Industry shows a similar picture. Note that this does not mean that the recovery is strong by any means. But last week the news, in spite of the unstable financial markets, were if anything indicating that the economy may continue on this path. I'm referring to fiscal news.

The budget deficit increased. That in and off itself says nothing, since the deficit is endogenous. In part the deficit went up as a result of tax cuts (a lot going to corporations and the wealthy). But also higher spending, quite a bit on defense. So there is a lot to complain about how money is being spent and how taxes are being collected. But that provides a modicum of stimulus. Trump, one should note, actually was more accurate on this than Wolf. He said that there is no fiscal danger, and that the US runs no risk of default (so why would financial markets be concerned with that), since the US can print money. Note that printing money might have consequences, but these are not the ones orthodox economists often suggest (see more here).

Contrary to Wolf I don't think that the trade wars would affect significantly the US economy. It might affect China, and certainly will have effects on the supply chains of US corporations. It might lead to higher prices, but it's implausible that it would bring the economy to a halt. The American economy depends on domestic demand. Nothing much will be affected by the trade war on that front. Also, while I think that student debt (and car loans too) are out of control, and will have implications, it's not clear that these, by themselves would cause a recession, in the way that mortgage loans did last time. They might not affect domestic demand to the same extent, at least not in the short run.

If there is a risk (besides monetary policy) is the persistence of financial speculation and the shadow financial sector, as represented by for example Collateralized Loan Obligations (CLOs), which have been going to high risk non-financial corporate firms (like Sears). But that does not mean that a recession is around the corner, and this weak recovery can (arguably) prolong itself for a few more quarters. Hey, conceivably it might go on until the 2020 election, giving Trump a serious shot at reelection (and that's not a happy thought).

10 years after the financial crisis and its lasting effects on Americans

Published by Anonymous (not verified) on Mon, 01/10/2018 - 2:00am in

By Breshay Moore.

This year marks the 10th anniversary of the 2008 financial crisis. Although the crisis is remembered for foreclosures, bank failures and bailouts, many American citizens are still unaware of what caused it. Understanding this is important to prevent future crises and think about what kind of financial system we want to have: one that serves people and invests in communities, or one that enriches a handful of wealthy bankers and money managers while making our economy less fair and safe for the rest of us.

In simple terms, the financial crisis was a result of deregulation of the financial sector, and reckless and predatory practices by greedy financial players all across the board, from mortgage lenders to Wall Street traders to the largest credit rating agencies.

In the lead-up to the crisis, mortgage lenders were engaging in fraudulent and deceptive sales practices to make toxic mortgage loans to home buyers, which they knew the borrowers could not afford. Predatory lenders particularly targeted people of color, especially women of color, for these higher-rate loans. Meanwhile, these risky mortgages were packaged and sold to investors around the world, becoming implanted throughout the financial system. The economy went into a recession in late 2007, defaults on mortgage payments increased and housing prices plummeted, resulting in billions of dollars in mortgage losses. This had a chain reaction in the financial system because of the number of financial institutions that had stakes in the housing market. These string of events shook the entire economy, fueling the worst recession in the US since the Great Depression.

Millions of families lost their homes or jobs. Median wealth among households fell tremendously: From 2005 to 2009, median wealth among Hispanic households fell by 66 percent, by 53 percent among Black households, by 31 percent among Asian households, and by 16 percent among white households. Millions of people also suffered major drops in income, property values, retirement savings, and general economic well-being. The crisis produced lasting effects. Families are still struggling economically, especially in communities of color.

After all the damage was done, no one was held accountable. Financial players made billions of dollars in bonuses and profits. Instead of helping the communities that were most affected, Congress and The Federal Reserve began bailing out big banks with public money. We recently learned that 30 percent of the lawmakers and 40 percent of the top staffers involved in the congressional response to the crisis have since gone to work for Wall Street.

In 2010 President Barack Obama introduced legislation containing important reform measures in response to the crisis. The Dodd–Frank Wall Street Reform and Consumer Protection Act created rules to protect consumers and regulate the financial industry. This law created the Consumer Financial Protection Bureau (CFPB) to promote transparency and fairness in the consumer-finance industry, and to holding financial institutions accountable for engaging in predatory and discriminatory practices. This independent agency has done a lot for consumers, and has returned more than $12 billion in relief to more than 29 million cheated consumers.

In return for all the money that Wall Street has poured into political campaigns and lobbying, President Trump and Congress have been working hard to undo rules that  regulate the financial sector. Countless bills have been introduced and passed in Congress to deregulate banks and lenders. One of these bills, S. 2155, which became law in May, not only increases the risk of future financial disasters and bank bailouts, but makes it easier for mortgage lenders to discriminate on the basis of race, ethnicity and gender. Sixteen Democrats and an Independent supported the GOP in pushing this deregulatory bill. The vote did not go unnoticed and public sentiment is not on their side.  In fact, 88 percent of all likely voters — across party  lines — support holding financial companies accountable if they discriminate against people because of their race or ethnicity. And 64 percent of voters think big banks and finance companies continue to require tough oversight to avoid another financial crisis.  

The lack of restrictions on banks and other financial institutions put consumers and the economy at risk. The 10th anniversary of the financial crisis should encourage us to redouble our efforts to push for changes to our financial system so that it works for us not just for Wall Street.


Breshay Moore is a Senior at Towson University, studying Advertising and Public Relations. She was recently a Communications and Campaign intern for Americans for Financial Reform.

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