How Wall Street Sold Out America Email Print

By Bob Kendall
09/22/2008 12:08:39 PM EST
That was Time Magazine's cover headline with the sub-title: They had a party wow, you're going to pay" (meaning the U.S. taxpayer).

Of course, what happened took much more than Wall Street to generate such a colossal economic collapse. It was far more complex, than finger pointing at Wall Street.

The savings and loan $200 billion bailout in the late 1980's was only a preview of things to come. If at that strategic point in time, regulations had been demanded of banks, with carefully controlled oversight, perhaps the 2008 economic meltdown could have been avoided.

Instead, in 1999, then President Bill Clinton signed the mislabeled Financial Services Modernization Act, also called the Gramm-Leah-Bailey Act. This act, simply stated, pulled down Glass-Steagall's reforms. It eliminated the wall separating security firms and investors.

Under Clinton the government heavily promoted home ownership. One tragic way to do this was to re-distribute the wealth. This was slippery slope economics. U.S. citizens who had full faith in the government never demolishing the value of its currency were betrayed big time.

Citizens who had no pension plans and had saved their cash earnings were given very low interest on their retirement savings. The developers who profited mightily saw the interest on home loans descending to low levels. Now low interest builders saw a chance to make millions on big building enterprises in Florida, California, Nevada and Washington state.

Illegal aliens, fearful of deportation, would gladly work for much lower wages than unionized home builders. The next gigantic contribution to the overbuilding homes boom was none other than the then fed chief Alan Greenspan.

Greenspan conveniently lowered the interest rate to a 40-year low. This was heaven to borrowers. This filled the pockets of Wall Street speculators with available cheap cash to gamble with in the stock market.

The so-called American dream, a lovely home, became to some warped minds the right of every U.S. citizen to own a home.

Previously generations of U.S. citizens thought that home ownership was not a right, but an opportunity to work, save and earn the funds to buy a home, albeit with a stable currency.

With Greenspan's dollar destruction via absurdly low interest rates, the lowest in 40 years, foreign investors from Europe and England with stable currencies rushed to what amounted to a fire sale of U.S. real estate.

Real estate outdid Vegas gambling casinos for putting cash on the line. Many people, unaware of the economic fallout of destroying their currency values, rejoiced.

The Bush administration appointed the head of HUD, who was encouraging giving risky loans. Fannie Mae and Freddie Mac seemed momentarily like heaven to home buyers with rotten credit histories. Real estate kept going up.

All they calculated they had to do was jump on the home buying band wagon, pay interest only, sell in a year or two, as soon as their contract allowed, and get rich quick Wow!

With millions of lousy loans, and the Bush administration not demanding tight loan controls, Fannie Mae and Freddie Mac loan scam operations were doomed to collapse and, of course, did.

With over 50% of U.S. home loans originating in this shakily run operation a government bailout to the tune of $100 to $200 billion for U.S. taxpayers to be stuck with followed. Those responsible for this economic debacle exited with multi-million dollar bonuses.

How sweet it is for fraud artists, or should we simply designate such colossal failures as just inefficient as they waltz off the scene with their pockets full of cash bonuses?

Fred LaMotte of Steilacoom, Washington, in a Letter to the Seattle Times Editors September 16, described how Reaganomics has been destroying the U.S. economy:

"Thirty years ago, America made an economic wrong turn. Corporations reveled in an orgy of deregulation. The invisible hand of the free market, we believed, was the hand of God. It was the hand of greed. Instead of freedom we got corporate feudalism.

"Reaganomics is a shell game. With one hand slashing taxes, another steals real wages, health-care benefits, pensions and home equity. Reaganomics busts unions, outsources jobs, defunds public infrastructure and spawns obscene disparities between worker and executive pay. Lobbyists write legislation, Wall Street makes war for profit. Corporations get no-bid contracts and fat tax breaks, enslaving the middle class with debt.

"Reaganomics insults our Founding Fathers, demonizing government as a succubus. But we the people are the government, founded to protect the commonwealth from privileged self-interest. In 1816, Thomas Jefferson wrote, 'I hope we shall crush the aristocracy of our moneyed corporations, which dare already to challenge our government to a trial by strength.'

"Trickle-down economics is a lie. Freedom requires more than free markets. Freedom requires government. America must return to the path of Jefferson, Roosevelt and Kennedy and vote for Sen. Barack Obama."