Magazine article Sojourners Magazine

A Bad Morality Play: What Have We Learned from the Financial Crisis?

Magazine article Sojourners Magazine

A Bad Morality Play: What Have We Learned from the Financial Crisis?

Article excerpt

THE DOW JONES Industrial Average recently returned to 10,000--and Wall Street celebrated. At the same time, the nation's unemployment rate climbed to almost 10 percent. (In my hometown of Detroit, it was more like 30 percent). The juxtaposition of those two figures--10,000 and 10 percent-was a moment of clear moral contradiction, and real moral clarity. The radical disconnect between Wall Street and Main Street was abundantly clear. A bad morality play was unfolding here, and when extravagant bonuses were announced for the top executives of the banks that Main Street taxpayers had so recently bailed out, an outraged nation was ready to change the script.

Just a year before, the financial collapse of Wall Street investment and commercial banks triggered this Great Recession. At breathtaking speed, the federal government moved quickly to bail out the biggest and richest financial giants in the economy. We were told they were "too big to fail" and, if they did, the rest of us would suffer greatly in an economic meltdown of apocalyptic proportions.

So we spent hundreds of billions of dollars to save the richest companies and people in America, offering them a safety net that we had long since decided not to grant to the poorest Americans, lest they "take advantage" of it. With few exceptions, Republicans and Democrats alike rushed to support this huge infusion of cash to Wall Street from the federal government. With our money, the banks were supposed to start lending again--which they had stopped doing--to credit-worthy businesses and homeowners for whom critical capital had dried up.

The American people were asked to trust the smart people who knew best and to count on the banks to restore the credit flow to individuals and small businesses that needed it. But some banks bought up (with our money) stocks, bonds, and other assets at rock-bottom prices and then made a killing in profits as the stock market stabilized and began to rise again. Then, to congratulate themselves for making a profit, they gave out record compensation bonuses to themselves while wages for the rest of the country continued to fall and more and more people found themselves without a job at all. It was a morality play almost too unbelievably bad to be true.

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Banks were bailed out with billions of taxpayer dollars that we were told were absolutely essential to avoid a complete system failure--with few strings attached. While no one seemed to like the idea of bailing out those who had made the shortsighted decisions that precipitated our economic crash, we went along because, in a crisis, everyone needs to sacrifice. There is continued disagreement with the way the bailouts were designed (quite poorly), but a lot of smart people I respect still believe that doing something was necessary to save our country and the world financial system from a much greater crash. All of it, however, would have been much easier to take if those who had advocated most fervently for bailouts to return our financial system to the status quo were not the same ones who made millions from the status quo in the first place. To then learn that the money went to corporate profiteering, instead of supporting homeowners and small businesses, and resulted in record bonuses to the top financial managers--that was just too much to bear. Wall Street is having a party while the rest of the country makes sacrifices and does what is necessary to make it through. It is clear that this is immoral, and now the country needs to ask: Should it also be illegal?

I AM AWARE, of course, of the conventional economic analysis that the stock market often comes back faster than jobs do, but those conventional rationales don't adequately explain the phenomena we are seeing on Wall Street these days, nor do they acknowledge the moral failings here. The predominance of the paper economy over the productive economy was a root cause of this recession, and that preference is one of the core realities that must be changed. …

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