Over Thanksgiving weekend, I saw the documentary “Inside Job” (2010, dir. Charles Ferguson, narrated by Matt Damon) about the stock market collapse of 2008. It’s a movie with a liberal agenda and zero pretense toward neutrality. At times, I was frustrated by the cuts the editor made, because it seemed unlikely that the subjects interviewed (lobbyists for investment banks, professors at Harvard who advocated for less banking regulations, and also happened to command six and seven figure consulting fees from large banks, politicians) could be both so corrupt and so stupid. So I’ll give those subjects the benefit of the doubt.
Regardless, director Ferguson makes a good argument for banking regulation. Since deregulation began in the 1980s, the rich have gotten richer, and the American middle class has shrunk. For the first time in America’s history, this generation will be less educated and earn less money than its parents (says the movie). Basically, the bankers get disproportionately high salaries, even during times of loss. These salaries are funded not just by tax payer funded bailouts, but by the lost income and investments of the middle class. We let them merge after nullifying Glass-Steagall, then called them too big to fail. Someone ought to have noted that they were too corrupt to succeed.
How did they all have AAA ratings when their actual liquidity was only about 3%, with 97% debt? They bet against their own investments, and created a demand for crap mortgages, which no one inside these banks believed had value. Essentially, traders knew their investments might harm the economy, and their own companies, but they were in it for the very quick profit. And they got it. Thanks, guys! Hope that house in the Hamptons is awesome! Can I come over and use your pool?
The New Yorker this week has a good companion piece on the subject:
http://www.newyorker.com/reporting/2010/11/29/101129fa_fact_cassidy
I’ve been thinking about this a lot. It doesn’t make sense that we keep backing the very institutions that destroy us. Banks are necessary. They are good. They grease the economy. Already, they’re paying the government back. But they need regulation. Laws that prevent them from committing harm. So do insurance companies, hospitals, armies, and governments. People are good, and can often be depended on to make good decisions. Corporations, where no one individual is responsible, and everybody works for a paycheck, are not people. They’re a unique and cold-hearted beast. Everybody knows that. Liberals and conservatives surely must agree on that point, at least. So why has this banking system been so difficult to correct? I think I know.
We have a God in this country, and we worship him before all others. That God is money. We assume that people who have it are somehow better than us. They’re smarter, craftier, more savvy. The Kennedy money came from bootlegging, and probably a few dead bodies in some rivers here and there, but who cares? They’re so good looking! They have a family compound! It’s got a rose garden and guest houses! What they have defines them more than their actions.
We’re all guilty of it. I treat people in suits differently than those who wear jeans. I assume they know more about social rules, have more self-respect, are smarter. I forget that maybe they just work for their dads; maybe they’re just like everybody else, only luckier.
I grew up on Long Island, in a town where half the dads were investment bankers, and half the kids were complete assholes. This is not random coincidence. It’s not just the rich who believe their own hype—sure bankers totally deserve 100 times more annual salary than engineers, who actually went to school to learn math! They’re REALLY good at their jobs! It’s the poor who believe it, too. And the middle class. We all buy into the God of money. So when it comes time to slap their wrists for doing wrong, we just can’t bring ourselves to do it. After all, how can we punish the very people we wish to become?
Doomsday predictions belong to the Atlantic Monthly, and I’ve never liked them. But this banking crisis seems symptomatic to me. It’s not just the banks, it’s the fuel companies, and the lobbies, and the institutional corruption of corporations that no longer follow free market rules, or even rules of common sense. They don’t have to: they’ve bought everybody who might stop them, and are free to act irrationally. Small publishers can’t acquire small, good books, because they’re owned by monoliths, and now there’s just one party line. Who wants small profit when you can mass produce a blockbuster? Or a flop, and lose everything? Doctors can’t treat patients unless they sign on the dotted line, in triplicate. Or maybe the corrupt ones can just testify against sick people, or double bill Medicare. Monsanto owns the patent on soy beans. Food is patented! We don’t produce anything in this country. We consume. And have somehow misapprehended this as a virtue. So has the rest of the world, because they, too, worship money. It is the only reason for our continued cultural dominance. But what happens when we go broke?
The Great Recession was the warning. Like the 1890s blip in the Gilded Age before it, the Great Recession of 2008 indicated a need for market correction. Regulation. Prosecution of individuals who took bribes, or knowingly committed harm, not just in banking, but in all industries. Otherwise, we really are headed for a Great Depression.