Abstract
The economic elite, confident in light of their 2008 economic collapse and subsequent bailout that the political class will underwrite their reckless and exploitative financial behavior, vehemently oppose regulatory reform. While in light of lackluster demand from the general public, left all the more impecunious from largely financing this bailout, financial institutions did not invest the bailout money in the real economy, but mainly in the financial economy (themselves). Lucrative in that the government taxes on the general public that helped finance the bailout thereby contributed both the general public’s need for the money and the financial institutions money to satisfy that need, as they then lent the general public back what was/had been their own money at vastly inflated rates. Moreover, largely eschewing the bailing out of underwater mortgage borrowers, economic elites further profited enormously from buying up foreclosed housing at rock bottom prices!
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Notes
- 1.
“Underwater” is the popular term used to describe a situation in which—as in the meltdown under discussion where increasing numbers of the homes of defaulting mortgage borrowers came onto the market just as, due to the tightening of credit and concomitant difficulty of obtaining new mortgages, demand for residencies fell—the price of homes falls so much that even those who may have paid down their mortgages to a considerable extent, find that their outstanding mortgage debt is greater than the market value of their home.
- 2.
See Chapter 2, footnote 4, while in addition Trump appointed avowed opponent of the Consumer Financial Protection Bureau, Mick Mulvaney as its director, who subsequently fired all 25 members of its advisory board.
- 3.
See Chapter 1, footnote 2.
- 4.
Individual instances of default risk, when aggregated with sufficient numbers of other such instances, or taken over a long enough time, will inevitably manifest themselves as costs.
- 5.
See Chapter 2, footnote 3.
- 6.
American International Group, most significantly, insured financial institutions against bad debt (by offering credit default swaps on collateralized debt obligations) thus enabling many such institutions, that might otherwise have balked at the substantial “downside” risk that was a concomitant of trading in such potentially highly profitable securitized derivatives, to insure against, or “lay off,” this risk.
- 7.
Thus like the typical “shell game” in which a small object, such as a pea, is placed under one of three shells, which are then moved around so rapidly that the “punter” or “mark” losses track of which shell the pea is under, here the taxpayer’s money, first taken by the government, is then either handed off to (or backs the creation of fiat money handed off to) the financial institutions (at low interest rates), with the consequence that the confused taxpayer or “mark” often rendered relatively impecunious due to such taxation, has to turn to these financial institutions to borrow (back) (at high interest rates) the money she/he initially paid in taxes. Government taxation thereby providing both the need for the money, and the money for the need, from the combination of which the financial institutions profit at the expense of those who provided the money in the first place!
- 8.
See footnote 4.
- 9.
“Moyers and Company,” PBS broadcast, October 20 and 21, 2012. Indeed, the wealthiest 1% of families in the US own about 40% of all US wealth, which is to say much more than the bottom 90% who own only about 25%, while the three wealthiest individual US citizens (Bezos, Gates, and Buffett) own more wealth than the bottom 50% of the population! Nor is such inequality limited to the US, for as Oxfam recently reported, the world’s 26 wealthiest Billionaires own as much wealth as the bottom half, or about 3.9 Billion, of the world’s population!
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Glynn, S. (2020). Inverted Socialism: Robbing from the Poor to Give to the Rich, by the Best Politicians Money Can Buy. In: The Economic Logic of Late Capitalism and the Inevitable Triumph of Socialism. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-52667-2_3
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