by Rohan Sharma
Our news networks have been set ablaze by the apparent danger of domestic terrorism; the failed Christmas day bomber and the more recent Times Square attempt struck fear into the hearts of Americans. Although these undoubtedly evil individuals deserve their fair share of media attention, we often overlook the truly devastating actions of others—specifically of those in the banking industry. Deluded by fear and extremism, we failed to notice the bomb ticking on Wall Street.
The Financial Crisis of 2008 created devastation on both a local and global scale. Providers lost their jobs, families lost their homes, and America lost its livelihood. According to the Economic Policy Institute, the class of 2010 will face the highest rates of unemployment in at least a generation. How did we, the most advanced nation in the world, let such a travesty occur?
It all started with the financial deregulation movement, specifically with the 1999 repeal of the Glass-Steagall Act, a provision that separated commercial and investment banking. Banks then developed complex instruments like derivatives to hedge risk or provide leverage in transactions; they were reaping massive amounts of profit without any federal oversight.
Even further, financial institutions began predatory lending, a practice in which they gave adjustable rate mortgages to people who clearly could not afford homes. Knowing this, they bundled these risky mortgages in the form of securities, essentially selling bad loans as investments. The large housing bubble that ensued—paired with this so called “financial innovation”—resulted in the worst economic catastrophe since the Great Depression.
The brigands of Wall St. wrecked the world economy and fled the scene with golden parachutes. Now, they are back on the same track with the same hazardous practices; Goldman Sachs, the firm currently under investigation by the Securities and Exchange Commission (SEC), posted over $3.5 billion dollars in first quarter profits. Even after the American tax payers shelled out over $700 billion to bail out these “too big to fail” institutions, they continue to exhibit unadulterated greed and blatant disregard for those on Main St.
While we were bolstering airport body scanners and the terrorist watch list, we failed to consider the implications of mortgage backed securities and credit default swaps.
Clearly, there is something wrong with our country when we effortlessly pass bills that strip our civil liberties, yet congressional debate ensues when we attempt to implement financial regulatory reform.
The damage done by bankers—and the legislators that let them thrive—is overshadowed by the fear generated from gun-toting radicals clad in foreign garb. We must reassess the true threat that our society faces. Ultimately, it is intrinsic greed that endangers our way of life, especially when exhibited by those who rule our country from within.