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September 20, 2019

Lehman Crash Anniversary: Wall Street’s TBTF Wealth Extraction Mechanism is Alive, Well & Getting Worse

Last Sunday was the 11th anniversary of the 2008 crash of Lehman Brothers investment bank and the onset of the worst financial crash since 1929 and the beginning of the worst economic catastrophe for the country since the Great Depression in the 1930s. 
Wall Street’s biggest too-big-to-fail banks, which were all bailed out by taxpayers in 2008 and only exist today because of those bailouts, are bigger, more dangerous and anti-competitive than ever. But even worse than all that, too-big-to-fail systemically important financial institutions have fundamentally changed finance into a wealth extraction mechanism for the few rather than a wealth creation system for the many. 
That’s why we must thoroughly change finance and get it back into the business of supporting the productive economy, jobs and growth.
Don’t buy Wall Street’s spin that we’re so much better off today than in 2008. That’s a self-serving claim designed to mislead people: of course, we’re better off than 2008 when the financial system was a disaster and collapsed due to Wall Street’s unrestrained risk-taking and widespread illegal if not criminal conduct! The real question and the correct standard must be different and higher:
Have the systemic and moral hazard risks been reduced enough so that the American people can have confidence that financial reform is sufficient and effective to protect citizens, taxpayers, the financial system, and the economy from Wall Street’s too-big-to-fail systemically important financial institutions?
As we detailed in this presentation “The State of Financial Reform on the 11th Anniversary of the Crash of Lehman Brothers,” the answer to that question is an emphatic “no.”
(For those who want a more global view of what’s happening, check out this presentation to a Financial Stability Board (FSB) workshop at the Federal Reserve Bank of New York earlier this week: “The Too Big to Fail Problem is Alive, Well and Getting Worse.”)


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