Aw, poor bankers. They worked so hard to qualify so many people to lend money to, and look what happened? Now the borrowers can't pay the money back, and they will go into default on their mortgages.
But it's all the fault of greedy borrowers who wanted to act rich and got overextended, right? Someone has to save the poor bankers because when they go bust they take the entire economy with them.
Crap.
This is the direct result of the Reagan Revolution. First the Reaganites created the Savings and Loan Crisis because their deregulation of interest rates had made America's home lenders unable to attract enough funds to use to issue mortgages, so they "solved" that problem by deregulating the S & L's. The resulting failure of the entire industry required a massive government bailout using taxpayer funds to save the economy.
Let's not forget that St. Ronnie appointed Alan Greenspan as Federal Reserve chief in 1987 as much of the S&L disaster was being worked out. The government bailout made a lot of investors extremely wealthy while many other people, those without great wealth to start with, lost everything. This was a part of the Reagan Revolution to make the wealthy even more wealthy and to put pressure on the middle class. It was written into law in the Financial Institutions Reform Recovery and Enforcement Act of 1989 (FIRREA). The bank failures and government handouts had a lot to do with creating the recession of 1991 and 1992 that was a key element in the defeat of George H.W. Bush by Bill Clinton and also may have created a moral hazard that encouraged the poor lending practices that have created the current subprime lending disaster.
The certain pattern of an unregulated financial market is always a boom, then a bust, and then a demand that the government bail out the biggest banks and other culprits to save the economy. The middle class always gets hurt, while the most wealthy get even more wealthy.
Remember also that without an inheritance tax on great wealth, that wealth is passed down through families through inheritance to people who did nothing to earn it and usually could not do anything other than shepherd and defend their family wealth. Inheritors of great wealth are generally very conservative with aristocratic views of society who practice politics that itself damages the general productivity of the economy. An example is Richard Mellon Scaife who funded many of the conservative think tanks like the Heritage Foundation, used millions just to attack Bill Clinton, and later created a sinecure as Dean of Pepperdine Law School for Ken Star's services in behalf of the Mellon fortune.
The inheritors of great wealth are so busy defending that wealth and their social position that they have no time or energy to add to economic productivity. That's because economic productivity is a result of the middle class. It is simply not something the inheritors of great wealth do.
The Reagan Revolution has been all about building up great fortunes while damaging the middle class. It was a system. It involved deregulating financial activity, eliminating the power of workers to organize and effectively negotiate for their share of the rewards from their own productive efforts, creating a boom and bust economy of the same kind that led to the Great Depression, and changing government rules so that big businesses were able to get government to tax the working and middle class and transfer the resulting wealth to the very wealthy. (See David Cay Johnston's excellent expose Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill) for the details. Also see Naomi Klein's book Shock Doctrine: The Rise of Disaster Capitalism.)
It's time to stop the wealthy from their power grab and return America to the middle class to whom this nation has always belonged.
* This is true of the financial economy, but Different rules apply to the real economy in which true competition can exist.
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