Saturday, November 27

The 2009 financial crisis taught us hard lessons. Have the Democrats learned them? | David Sirota and Alex Gibney

TO First-term Democratic president with a majority in Congress and uncompromising Republican opposition. A country disillusioned by the corruption and mismanagement of a previous administration. A working class traumatized by an economic recession. An establishment that asks not aggressiveness and audacity, but half measures and commitment.

If this sounds familiar, it is not just because it describes this current moment, but because it is the experience we lived through 12 years ago: a political collapse that destroyed the remaining faith of many Americans in their government and eventually gave birth to the presidency. of Donald Trump.

That collapse crushed faith in hope and change, and led to Maga and chaos. And if Democrats continue to make the same decisions again, we should expect the same results, or worse.

2009 wasn’t 2021, but the story tends to rhyme. Back then, the contagion was not a virus, it was a financial panic caused by the collapse of what had been the most stable pillar of the American economy: the mortgage. But the houses were built on precarious foundations. After a streak of banking deregulation, the Wall Street giants had transformed into the newest peddlers of old Florida wetland schemes, attracting borrowers and Pension funds gambling your life savings on debt and unsustainable house prices.

When enough homeowners couldn’t make their payments and home prices plunged, millions faced foreclosure, retirement systems faced huge losses In mortgage-related investments, 401k plans were taking on the stock market declines, and banks faced the prospect of insolvency.

In the midst of this financial pandemic, however, there was a glimmer of something better: Barack Obama, who had campaigned on the inspiring promise to “bring a new era of responsibility and accountability to Wall Street and Washington.”

That FDR-style rhetoric resulted in a landslide victory in the 2008 election, a large Democratic majority in Congress, and high hopes that a new administration would fight the Great Recession with the same kind of robust New Deal that Franklin Roosevelt deployed to successfully combat the Great Depression.

But that did not happen.

Obama had helped the Bush administration forge the Troubled Asset Relief Program (Tarp), whose name seemed to promise assistance for homeowners, but instead provided most of its benefits to a handful of financial institutions. When he took office, Obama might have changed the way Tarp’s money was spent, but he and his administration continued to funnel the cash to Wall Street. The relative misery that leaked in to help borrowers extended primarily to foreclosures to “skim the trail” of financial institutions, as Obama’s Treasury Secretary Tim Geithner put it. reportedly said.

Shortly after, the Funded by Wall Street Obama Administration reduced your economic stimulus plan, stepped back his promise to reform bankruptcy laws, he refused to prosecute the bankers, abandoned legislation to limit the size of too-big-to-fail banks, and permitted ransom money to subsidize generous executive bonuses.

Some lonely voices in Washington tried to sound an alarm. Tarp’s inspector general, Neil Barofsky, warned that the opaque bailout was being misused. Congressman Brad Miller, a Democrat from North Carolina, tried to make Obama follow through on his promise to allow judges to write down mortgage loans. And Senators Carl Levin and Ted Kaufman, a former aide to Joe Biden, lobbied their party to prosecute and disintegrate the banks.

They were largely ignored, and Obama later justified the rejections by insisting that doing something else would have “required a violence to the social order, a breakdown of political and economic norms.”

But defending the banks and failing to deliver material gains to a nation ravaged by corporate malfeasance gave the Conservatives an advantage. political rescue, allowing them to further tear apart the social fabric once united by the belief in shared sacrifice.

Fueled by the tearful volleys of Glenn Beck and Rick Santelli’s spiel on CNBC’s dog whistle Against the mortgage “losers,” Republicans were able to divide the country and present themselves as populists, and mock the Democrats in the 2010 Tea Party elections.

A few years later, Democratic leaders confidently foretold that they would be able to overcome the wrath of the working class with the support of the wealthier suburbs. After all, the top 10% of people with higher incomes saw their wealth increase by 27% during the Obama presidency.

But all other strata saw incomes decline, and countless neighborhoods were eviscerated by more than 6 million foreclosures, condemning families to lose battles with the banking bureaucracy, government bureaucracy, and a judicial foreclosure machine.

I was from Detroit Sandra hines, who tearfully told a congressional committee that she was kicked out of her home in the dead of winter after she fell behind on her mortgage payments.

There was Florida oncology nurse Lisa Epstein, who, right after giving birth to a little girl, faced foreclosure and then endured a Kafkaesque fight to expose fraudulent mortgage practices, resulting in a slap deal that brought her back. only $ 600..

These experiences, repeated ad nauseam as Wall Street executives increased their stock portfolios, convinced many to view past promises of “hope and change” as a ruse. The ensuing outrage helped Republicans complete their inauguration with Trump, a billionaire charlatan who fosters racial animosity and describes himself as uniquely capable of “making America great again.”

The dividing line from the financial crisis to the failure of the Democrats to help the rise of Trump is evident in a study of the Center for American Progress. The Democratic think tank found that “larger proportions of underwater homeowners were prominent characteristics” of more than a third of the 206 counties won by Obama in 2012 who switched to Trump in 2016.

“The legacy of the financial crisis is Donald J. Trump”, concluded Trump’s adviser Steve Bannon.

For today’s Democrats, the bottom line is not simply that Trump is a pathological liar, a racist and undemocratic threat that exacerbated the problems he diagnosed. The lesson is more basic: When the United States votes for hope and change and instead is forced to do more of the same, the reaction can be swift and it can benefit conservative opportunists who will make things worse.

A dozen years later, with Democrats coming to power amid another national crisis, there were early signs that this lesson had been learned: Senate Majority Leader Chuck Schumer. said At the beginning of Biden’s presidency, Democrats must pass bills that are “big, bold and strong,” adding that “we will not repeat that mistake” of diluting the legislation. The child tax credit in Covid’s initial aid package was a solid victory – it significantly reduced child poverty and a recent poll shows less anti-Biden animosity among Trump voters who received him.

However, much of the direct assistance in that legislation has been stagnant, cut or scheduled for expiration – even when almost one in five households lost all your savings during the pandemic. Worse, Biden and the Democrats have been considering big cuts to their already scaled-down package of housing, anti-poverty and climate initiatives. They have also reflected on the funding elimination provisions to reduce drug prices and have considered adding means test and job requirements that could make it difficult to access direct help.

Taken together, it feels like 2009 all over again.

Billionaires are doing better than everas more and more Americans are financially pulverized and seething with rage. Just a year away from the midterm elections, the last center show Biden’s approval rating plummeting, with particular erosion among Democratic constituencies promised change but seem to feel like they’re just getting more of the same.

Once again, the progressive voices sounding the alarm are being drowned out by conservative Democrats, their corporate donors, and pundits. demanding Surrender. Meanwhile, Trump and his Republican minigames are sweeping the country posing as populists, all while a new generation of right-wing media peddlers are turning popular discontent into growing support by right-wing authoritarianism.

But remember: the past does not have to be a prelude. If Democrats are willing to learn from recent history, they still have time to make different decisions.

In Congress, Democratic lawmakers may find that there is no “middle ground” commitment to Republicans or corporate greed. They can end the obstructionism and ignore corporate lobbyists and donors trying to stop their legislative program, which may be the last chance to help workers and avoid a climate cataclysm.

In the White House, Biden can break with Obama’s fetishization of bipartisanship. Instead, you can try to be a modern-day Lyndon Johnson, pressuring die-hard members of your party to embrace real hope and change.

While none of this would guarantee success, it would at least give the party a fighting chance to enact its agenda and materially improve people’s lives.

That simple goal is often hidden in the miasma of social media-driven politics. But history suggests that going big and providing tangible help to a nation in need is probably the only way to restore some faith in government, avoid an authoritarian takeover, and end the collapse of disillusionment that threatens to incinerate our nation. democracy.

  • Investigative reporter David Sirota and Oscar-winning documentarian Alex Gibney are executive producers of the new Meltdown podcast series, which explores the aftermath of the financial crisis.

  • This essay is published in conjunction with the Meltdown release. Find podcast episodes here

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