Franklin Roosevelt took a frozen banking system and created the New Deal.
Ronald Reagan used the sharp recession of the early 1980s to
seriously damage unions. In January 2009, Obama had overwhelming Democratic majorities in Congress, $350 billion of no-strings-attached bailout money and enormous legal latitude. What did he do to reshape a country on its back?
First, he saved the financial system. A financial system in collapse has to allocate losses. In this case, big banks and homeowners both experienced losses, and it was up to the Obama administration to decide who should bear those burdens. Typically, such losses would be shared between debtors and creditors, through a deal like
the Home Owners Loan Corporation in the 1930s or bankruptcy reform. But the Obama administration took a different approach. Rather than forcing some burden-sharing between banks and homeowners through bankruptcy reform or debt relief, Obama prioritized creditor rights, placing most of the burden on borrowers. This kept big banks functional and ensured that financiers would maintain their positions in the recovery. At
a 2010 hearing, Damon Silvers, vice chairman of the independent Congressional Oversight Panel, which was created to monitor the bailouts,
told Obama’s Treasury Department: “We can either have a rational resolution to the foreclosure crisis, or we can preserve the capital structure of the banks. We can’t do both.”
Second, Obama’s administration let big-bank executives off the hook for their roles in the crisis. Sen. Carl Levin (D-Mich.)
referred criminal cases to the Justice Department and
was ignored.
Whistleblowers from the government and
from large banks noted a lack of appetite among prosecutors. In 2012, then-Attorney General Eric Holder
ordered prosecutors not to go after mega-bank HSBC for money laundering. Using prosecutorial discretion to not take bank executives to task, while legal, was neither moral nor politically wise; in a 2013 poll,
more than half of Americans still said they wanted the bankers behind the crisis punished. But the Obama administration failed to act, and this pattern seems to be continuing. No one, for instance, from Wells Fargo has been indicted for
mass fraud in opening fake accounts.
Third, Obama enabled and encouraged roughly 9 million foreclosures. This was Geithner’s
explicit policy at Treasury. The Obama administration put together a foreclosure program that it
marketed as a way to help homeowners, but when Elizabeth Warren, then chairman of the Congressional Oversight Panel, grilled Geithner on why the program wasn’t stopping foreclosures, he said that really wasn’t the point. The program, in his view, was working. “We estimate that they can handle 10 million foreclosures, over time,”
Geithner said — referring to the banks. “This program will help foam the runway for them.” For Geithner, the most productive economic policy was to get banks back to business as usual
Nor did Obama do much about monopolies. While his administration engaged in a few mild challenges toward the end of his term,
2015 saw a record wave of mergers and acquisitions, and 2016 was another busy year. In nearly every sector of the economy, from
pharmaceuticals to
telecom to
Internet platforms to
airlines, power has concentrated. And this administration, like George W. Bush’s before it, did not prosecute a single significant monopoly under Section 2 of the Sherman Act. Instead, in the past few years, the Federal Trade Commission has gone after such villains as
music teachers and
ice skating instructors for ostensible anti-competitive behavior. This is very much a parallel of the financial crisis, as elites operate without legal constraints while the rest of us toil under an excess of bureaucracy
With these policies in place, it’s no surprise that Thomas Piketty and others have detected
skyrocketing inequality, that
most jobs created in the past eight years have been temporary or part time, or that lifespans in
white America are dropping . When Democratic leaders don’t protect the people, the people get poorer, they get angry, and more of them die.