For more on what went wrong with the economy and why it will be so difficult to fix, there’s good material of every length on the web these days — and most of it lands on one answer.
If you’re looking for something meatier than Twitter dispatches from the London G20 summit but you’re not prepared to dive full-scale into Simon Johnson’s celebrated Atlantic opus “The Quiet Coup,” you could simply read Joan Walsh’s blog hit on Johnson’s piece here at Salon. She gets to the heart of the matter fast:
… as the right and the left debate what, exactly, caused the current mess, Johnson shows that every single possible culprit had one thing in common: It benefited the increasingly powerful financial sector, the monster that ate the American economy:
“Top investment bankers and government officials like to lay the blame for the current crisis on the lowering of U.S. interest rates after the dotcom bust or, even better—in a “buck stops somewhere else” sort of way—on the flow of savings out of China. Some on the right like to complain about Fannie Mae or Freddie Mac, or even about longer-standing efforts to promote broader homeownership. And, of course, it is axiomatic to everyone that the regulators responsible for “safety and soundness” were fast asleep at the wheel.
But these various policies—lightweight regulation, cheap money, the unwritten Chinese-American economic alliance, the promotion of homeownership—had something in common. Even though some are traditionally associated with Democrats and some with Republicans, they all benefited the financial sector. Policy changes that might have forestalled the crisis but would have limited the financial sector’s profits—such as Brooksley Born’s now-famous attempts to regulate credit-default swaps at the Commodity Futures Trading Commission, in 1998—were ignored or swept aside.”
All of that might seem like ancient history—Obama’s moving to clean up the mess, right? Except Johnson, like Krugman, believes that the continued power of the financial oligarchy makes real reform impossible.
Further evidence of this thesis comes every day.
NPR, for example, has been following a congressional plan to give homeowners at risk of foreclosure the chance to go before a bankruptcy judge, who will restructure the loan if there’s hope the person can pay with an adjustment. Judges can reduce the amount owed on the home to the home’s present value. These days, as property values have sunk, that could knock off thousands of dollars and save millions of homeowners from foreclosure. Keeping people in their homes for now would be a great boon to the struggling national economy. Property values in neighborhoods with houses in foreclosure plummet and banks today can’t even sell the foreclosed homes. There’s also the incentive to keep people working to pay their mortgages and, of course, the benefit of alleviating the social costs of rampant foreclosure and dislocation.
If you own a mobile home or a boat or a second home, you can already go through this process. The proposal would be a relatively simple and fast fix, proponents say.
So who is opposing the idea? Members of the financial sector, of course, and their lawmaker friends.
Here’s an update that aired Tuesday.
Here’s a primer from November, when the idea first started kicking around Capitol Hill.