US Rep. Marcy Kaptur (D-OH) and Former International Monetary Fund chief economist Simon Johnson discussed the state of the economy on Bill Moyer’s Journal and it is must see video. Even though this is something I read and write about regularly, it is shocking to hear just how dysfunctional Washington and how blatant Wall Street has become. The full 30-minute interview and transcript can be seen here. And I can’t recommend it highly enough.
Rep. Kaptur explains the reality in her district: Let me give you a reality from ground zero in Toledo, Ohio. Our foreclosures have gone up 94 percent.
Johnson adds that bailed-out banks have little incentive to help homeowners:
I’m afraid that it’s pretty obvious, and it’s very tragic, that they have no interest in helping the homeowners. They make money with what they’re doing. They expected a lot of these mortgages they made to default, okay? It was in their models. A high default rate. Now, they didn’t expect house prices to come down so much. That’s where they got their losses. But they absolutely made these loans expecting they would have to foreclose on people. And figuring they would make money on that.
Washington and Wall Street in Action
Rep. Kaptur details Washington dysfunction:
“Congress has really shut down. I’m disappointed in both chambers, because wouldn’t you think, with the largest financial crisis in American history, in the largest transfer of wealth from the American people to the biggest banks in this country, that every committee of Congress would be involved in hearings? [...] What we’re seeing is tangential hearings on very arcane aspects of financial reform [...] rather than hearings on the fundamental new architecture of reforming the American financial system.”
And now that the banks crisis has passed without any meaningful reform, Johnson explains:
“the opportunity for real reform has already passed. And, not only is there not going to be change, but I’ll go further — I’ll say it’s going to be worse, what comes out of this, in terms of the financial system, its power, and what it can get away with.”
Simon Johnson explains what it means when not one of the Wall Street bank CEOs attended President Obama speech on Wall Street last month:
Because they think that the next time they won’t even have to ask. They’ll just be given the bailout that they want.
And the future is looking even scarier. Simon Johnson’s biggest worry:
Another Great Depression. Right? If you don’t fix the financial system, Bill. If you allow them to have the same attitude. If you- if you actually allow them to increase their economic power, their ability to take risk, and their belief that they can shove the losses onto the government. And that’s why they didn’t show up to President Obama’s speech on Wall Street.
Muckrakers are essential
What we need to do going forward:
>SIMON JOHNSON: Well, I think you have to keep at it, Bill. I mean, that’s the lesson from previous generations of Americans, who have really confronted entrenched power like this. You have to keep at it. And you mustn’t be satisfied. When the Administration says, ‘Okay, we fixed it. Don’t worry. We did some technical tweaking on capital requirements, for example, in the banks.’ You have to say, ‘No, that’s not true. Let’s look at what’s happening, let’s follow it through.’ The muckrakers of today are absolutely essential, I think, to really pushing these banks. And revealing what they’re doing.And by the way, Bill, it’s going to I think it’s going to be a long haul. I think that the economy will start to recover. We’ll get some jobs back. It’s going to be very painful for a lot of people. But other people’s attention is going to drift. It’s a three, five, seven, maybe twelve year cycle. But when it comes back, it will come back with a vengeance. And it will be even, I think, even more devastating, in all likelihood, than what we just saw.
[also posted at No Quarter here.]