The bank bailout’s real cost
The New Yorker
The U.S. is “hastening along” a financial crisis that could prove as bad as the one that hit 10 years ago, said John Cassidy—and this time we don’t have the tools to fix it. The collapse of the investment bank Lehman Brothers in September 2008 opened “the biggest financial crisis and deepest economic recession since the 1930s.” But it would have been worse if the secretary of the treasury and the chairman of the Federal Reserve hadn’t gone to Congress and warned that “if they didn’t authorize a $700 billion bank bailout, the financial system would implode.” Saving the banks may have staved off Great Depression–level 25 percent unemployment. But “using taxpayers’ money to bail out greedy and incompetent bankers” inevitably had political consequences. Parties tied to bailouts in the U.S., France, and the U.K. all paid a price. And ordinary voters felt “the entire game had been ‘rigged.’” Both Donald Trump and Bernie Sanders seized on that, and ultimately the election of 2016 delivered a “stark verdict” on the bailout. The financial system remains fragile, and Republicans have undermined rules put in place to protect it. “Everyone knows that in a 2008-style panic banks could still go down like dominoes.” If that happens, it’s unlikely Trump will rebuild the “fragile cross-party coalition” that held the country together.