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September 3, 2011

The Death of a Dumb Idea

The primary reason banks, bankers and the broader financial industry haven’t been held accountable for their egregious and likely illegal conduct in, before and after the 2008 financial crisis is because it was feared such action would destabilize the financial sector and cause a more severe recession if not depression.

It was said over and over again that the economy depended on the financial sector and both were fragile.  They said, if any action was taken against banks, confidence will suffer if not disappear and with it our economy.  Moreover, we were told, any action against the banks would tip our economy into such disarray that Main Street would suffer much more than Wall Street.  

Now the fact bankers and their innumerable apologists (including purchased and ideological allies) conflated banks with bankers is no mystery.  After all, no matter what the Supreme Court says about corporations being individuals, it’s the actual bankers that run the banks that sign the checks.  The Obama administration rejected taking action against the banks or bankers many times.

It was much more important to save the economy than any short term, feel-good action against banks.  They won’t lend.  They won’t provide credit to keep the economy growing.  They won’t finance business expansion and hiring. How many times did we hear this? 

Well, after 3 years of putting taxpayers on the hook to bail out the entire financial sector and coddling banks and bankers, we see an economy that is struggling and almost certainly tipping into a double dip recession.  Lending and credit remain very, very tight.  Hiring is nonexistent and unemployment, underemployment and those who have given up looking after years of fruitless searching are all continuing to go up.  

The idea that holding banks, bankers and anyone else accountable for the financial collapse would threaten the economy and Main Street was a dumb idea to start with and it is well past time it died.  The FHFA, in its lawsuits against 18 of the largest financial institutions, should provide some accountability, finally.  But, maybe its most important result will be the death of a dumb idea. 

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