Thomas Frank's version of what happened during the economic meltdown, saving a few choice words for President Obama.
Some might think Thomas Frank, author of WHAT’S THE MATTER WITH KANSAS, might be writing from a liberal perspective. To a degree he is, but he saves some of his best barbs for the Obama administration.
Frank starts out trying to explain what led to the mortgage meltdown. He is especially struck by the similarity between what happened today with what happened in 1929. Three Republican presidents did everything they could to deregulate Wall Street. It was a boom period. People were buying stocks on margin and when the banks called in the loans, everything collapsed. Our 21st century parallel was sub prime loans and derivative hedge funds, also dangerous speculation. Because the 1929 market crashed and unemployment climbed to 25%, the democrats pretty much had their way for the next 40 years. Thomas Frank expected the same thing to happen in 2008, but it didn’t, and Frank tells us why.
Some of the language from the Twenties is even the same. Hoover’s Treasury secretary Andrew Mellon wanted to liquidate almost everything: “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate.” He wanted to “purge the rottenness out of the system.” Here’s where he sounds most familiar: “let the downturn take its course, let the failures fail, let the weak be purged, and have confidence that the strong will emerge stronger than ever.” Sort of an economic holocaust.
Frank argues that the democrats didn’t go on to right the ship after Obama’s election because the GOP blamed the crisis on the TARP bailouts. Everybody hated Wall Street at the time, especially the AIG bonuses. And that was a big government solution that cost billions. Suddenly it was big government that had caused the problem and Fannie Mae and Freddie Mac’s sub prime mortgages had cost us almost a trillion dollars, despite the fact that Fannie and Freddie were mostly independent at the time, led by the same people who were running Goldman Sachs and the other suicide bombers. They also disowned Bush, claiming he was in league with the big government liberals. So they’d pulled a real bait and switch. Frank thinks Obama should have been more Roosevelt like and broken up the big banks. Of course the democrats left themselves even more prone to big government criticism with the stimulus plan and Romneycare. Frank is again disappointed that the new plan catered to health insurance companies, but he doesn’t mention the role the Blue Dog democrats played in the compromise. Frank feels that with the large majories in both the House and the Senate, Obama should’ve been able to get single payer health care.
Frank tries to trace the origin of the Tea Party movement which led to the “shellacking” the democrats took in the 2010 elections. Rick Santelli’s speech on the floor of the Chicago Board of Trade was definitely a stimulus if not the main culprit. His Howard Beale like tirade went viral on You Tube. His reference to the Boston Tea Party may have given the movement its name. Santelli is a journalist, not a trader, but he had a problem with paying for the TARP requirement that banks modify mortgage terms which would have made payments more affordable, avoiding foreclosures. Banks refused to cooperate anyway, which may be why housing prices haven’t recovered as of yet.
There are a few other “villains” in Frank’s book. Glenn Beck supposedly hides his intelligence behind mismatched clothes and an overall disheveled look. Ayn Rand, Paul Ryan’s hero, had this thing against the poor. In her book, ATLAS SHRUGGED, the rich go on strike to show those mouthy worker bees what life would be like if the queen and her court just took off. Even Bill Clinton takes a few shots for moving too far toward the center. According to Frank, Larry Summers, treasury secretary under Clinton, eliminated banking rules that may have prevented the present debacle. Frank is unhappy that Obama kept Summers in his administration.
Frank goes to extremes in the last several pages. He predicts that if the GOP owns the presidency, The House, The Senate, and the Supreme Court, they will eliminate bank deposit insurance, claiming, “The lazy man down the street should no more get his money back when his bank fails than when the housing market fell apart.” Now that would definitely start class warfare and get a few bankers and politicians hanged from the nearest light pole.