By Nancy Spannaus
Sept. 27, 2018—A blockbuster forum at the National Press Club last night brought together five economic experts to discuss the 2008 financial crash and what can be done to prevent a new one. Addressing the audience of approximately 100 people were: 1) Nomi Prins, former Wall Street executive author and speaker; 2) Robert Kuttner, co-founder and co-editor of The American Prospect; 3) Marcus Stanley, policy director for the Americans for Financial Reform; 4) Professor Arthur Wilmarth, George Washington University Law School; and, 5) Bart Naylor, financial policy advocate for the Public Citizen.
Naylor set the stage by noting the need to “bridle” Wall Street to prevent the 2008 “tragedy” from being repeated. Each of the other experts then presented his or her evaluation of the causes of the crisis, and the direction for a solution. Their opening statements were followed by a short dialogue among the panelists and abundant audience questions—until the event had to be cut short for time.
I summarize the leading conclusion of each speaker here. A video of the event has been posted.
- Prins led off with an insiders’ report on how Wall Street’s “complexifying” of simple mortgage transaction built up the bubble which led to the crisis. Once it hit, the federal government had to make a choice as to whether to subsidize those bankers’ assets, or to support the real economy. They chose the former, and created $4.2 trillion to subsidize the banking system. Today, with another crisis looming, we have to get the government to choose the American population, not Wall Street.
- Marcus Stanley expanded on the extent of the bailout over the last 10 years, showing that it went far beyond simply TARP’s $700 bill. Yet the principals who carried out the bailout—Hank Paulson, Ben Bernanke, and Tim Geithner—just wrote an op-ed justifying their action, and complaining that there are too many limits on what the Feds can do to help the banks in a new crisis. We need a political revolution before the next collapse, he concluded.
- Professor Wilmarth dedicated his remarks largely to comparing the credit bubble of the 1920s with that which developed in the twenty years leading into the 2008 Crash. The difference is that the FDR Administration cracked down on the banks and implemented Glass-Steagall. Had Glass-Steagall not been eviscerated over those 20 years before 2008, the huge pyramid of debts that blew in 2007-8 couldn’t have been built up. The solution today is simple: Go back to the 1933 Glass-Steagall Act.
- Bob Kuttner identified the broad panoply of measures taken by the FDR Administration which, in effect, turned Wall Street into a “public utility,” in order to halt the Great Depression. He cited the Securities Act, Glass-Steagall, the Home Owners Loan Corporation, Fannie Mae, the Public Utilities Holding Company Act, and the Reconstruction Finance Corporation. All these have been taken down because both parties are now “in the tank for Wall Street.” We need the politics to put Wall Street back in its box for keeps, Kuttner concluded.
The event was sponsored and organized by a host of progressive organizations: Our Revolution Northern Virginia, Public Citizen, The American Prospect, Fairfax County Democratic Committee National Affairs, Americans for Financial Reform, Campaign for America’s Future, National Latino Farmers and Ranchers, OR Arlington, Loudoun Progressives.