Jan 21, 201302:17 PMLeft Business Brain
with Tom Breuer
Battering Wall Street’s bloody victims
(page 1 of 2)
In the late 2000s (or the “aughts” as my inner old-timey bicycle man has long preferred to call the decade), rampant greed on Wall Street crashed the economy, leaving many workers hopeless and jobless and, most tragically, temporarily derailing my dream of retiring early to live full time as a retro old-timey bicyclist who enjoys a hot-lather shave with a straight razor, gets into frequent donnybrooks, and spends hours on end at the neighborhood publick house sipping gin rickeys and upbraiding suffragettes. (For some reason that I can’t begin to fathom, my wife is no longer interested in hearing about this particular dream.)
Hardly anyone denies that Wall Street greedheads precipitated the crisis for which we all severely paid (some more severely than others; see old-timey bike man dream, deferred), but that hasn’t stopped some professional humorists (see Mitt Romney’s recent presidential campaign and stand-up comedy tour) from doing their best to distract people from this simple fact by taking a custom-fabricated titanium nine-iron to the already broken spirits of America’s nouveau poor.
So banks recklessly securitized subprime loans while mortgage lenders engaged in predatory practices, inflating a comically unsustainable housing bubble that forced a massive taxpayer bailout, cratered our economy, and now threatens to crush us under the weight of soaring government debt? That explanation’s too hard to understand and has a made-up word in it. Hey look, there’s a fat person buying YooHoo! with food stamps.
Of course, the hubris of the major players in the 2008 housing crisis has long been a wonder to behold, but it’s not over yet. You’d think they’d have learned after giving bonuses to people who clearly did not deserve them, creating a financial Bizarro World in which demerit pay became the new normal. (Show me the fast-food worker who’s rewarded with a seven-figure bonus after his chronic negligence at the McRib assembly station touches off global economic catastrophe and I may begin to believe that we’ve achieved economic justice once and for all.)
Yes, the hits keep coming. Following are just a few recent highlights from our gruesome journey through financial history:
You were caught screwing over middle-class people? Have a tax deduction! Critics have long argued that big banks’ bad behavior prior to the 2008 crash has not been adequately punished. You could certainly argue that TARP was a necessary intervention, but “too big to fail” showed that we were all too willing to let some pretty sleazy operators off the hook.
Unfortunately, individual homeowners were unlikely to receive such a sweet deal, and many faced foreclosure. Recently, however, several major mortgage lenders reached a settlement with federal regulators, ponying up $9 billion to compensate people whose homes were improperly foreclosed on. Justice at last.
Wait for it.
In a story that should be all too familiar to you, it turns out that you get to pay for the banks’ wrongdoing. Again.
The lenders’ payments to the victimized homeowners in question will be considered a cost of doing business and will therefore be fully tax-deductible. Yeah, let that one sink in for a minute.
At the very least, the foxes guarding the henhouse are saying all the right things:
“The government is abetting the behavior by not preventing the deduction,” said Sen. Charles Grassley, R-Iowa. “The taxpayers end up subsidizing the Wall Street banks after the headlines of a big-dollar settlement die down. That’s unfair to taxpayers.”
AIIIIIIIIGGGGGG! If you paid even casual attention to the goings-on during the 2008 crash, you may remember hearing about AIG. As Christopher Matthews described it on Time.com, AIG is “an insurance company whose financial products division – which sold billions of dollars in unregulated insurance protection against toxic real estate securities – helped sow the seeds of the 2008 financial panic.”
In short, the company sold insurance protection against subprime mortgage securities, and when the caca started hitting the fan in 2008, the government deemed it too big to fail. At death’s door, AIG eventually received a bailout to the tune of $182 billion.
Fed Chair Ben Bernanke later described the situation this way: “Here was a company that made all kinds of unconscionable bets. Then, when those bets went wrong, we had a situation where the failure of that company would have brought down the financial system.”
So what I’m hearing is that this one reckless and irresponsible company nearly killed our economy, and in order to prevent it from exploding and covering us all in E.coli and entrails, we had to bail it out. Outrageous, right?
Wait for it.
Okay, so you probably heard the rest. Not content to simply be alive after by all rights deserving to be bludgeoned to death by hobos and left in a side alley, AIG recently seriously (seriously!) contemplated suing the U.S. government for trying to extract unfair concessions in its bailout deal. Wow. That’s pretty tone deaf. But is it really all that surprising? That’s just the kind of bubble these dopes live in.
Eventually, AIG decided against the lawsuit because, you know, WTF?