Opinion: 'The Big Short' and Bernie鈥檚 plan to bust up Wall Street
If you haven鈥檛 yet seen 鈥淭he Big Short鈥澛犫�� directed and co-written by Adam McKay, based on the non-fiction prize-winning book by Michael Lewis about the housing and credit bubble that triggered the Great Recession 鈥� I recommend you do so.
Not only is the movie an enjoyable (if that鈥檚 the right word) way to understand how the big banks screwed millions of Americans out of their homes, savings, and jobs 鈥� and then got bailed out by taxpayers. It鈥檚 also a lesson in why they鈥檙e on the way to doing all this again 鈥� and how their political power continues to erode laws designed to prevent another crisis and to shield their executives from any accountability.
Most importantly, the movie shows why Bernie Sanders鈥檚 plan to break up the biggest banks and reinstate the Glass-Steagall Act (separating investment from commercial banking) is necessary 鈥� and why Hillary Clinton鈥檚 more modest plan is inadequate.聽
I鈥檒l get back to Bernie and Hillary in a moment, but first you need to know why Wall Street wants us to forget what really happened.
The movie gets the story essentially right: Traders on the Street pushed highly-risky mortgage loans, bundled them together into investments that hid the risks, got the major credit-rating agencies to give the bundles聽Triple-A ratings, and then sold them to unwary investors. It was a fraudulent Ponzi scheme that had to end badly 鈥� and it did.
Yet since then, Wall Street and its hired guns (including most current Republican candidates for president) have tried to rewrite this history.
They want us to believe the banks and investment houses were innocent victims of misguided government policies that gave mortgages to poor people who shouldn鈥檛 have got them.
That鈥檚 pure baloney. The boom in聽subprime mortgages was concentrated in the private market, not聽in government. Wall Street itself created the risky mortgage market. It sliced and diced junk mortgages into bundles that hid how bad they were. And it invented the derivatives and CDOs that financed them
The fact is, more thanof the subprime mortgages in 2006 were issued by private institutions, and nearly聽of the subprime loans that went to low- and moderate-income borrowers that year.
Why has Wall Street been pushing its lie, blaming the government for what happened? And why has聽the Street聽(along with its right-wing apologists, and its outlets such as Rupert Murdoch鈥檚 Wall Street Journal) so viciously attacked the movie 鈥淭he Big Short?鈥�
So we won鈥檛 demand tougher laws to prevent another crisis聽 followed by another 鈥渢oo-big-to-fail鈥� bailout.
Which brings us back to Bernie and Hillary. Hillary Clinton doesn鈥檛 want to break up the big banks or resurrect the Glass-Steagall Act, as Bernie does
Instead, she鈥檇 charge the big banks a bit more for carrying lots of debt and to oversee them more聽. She鈥檇 also give bank regulators more power to break up any particular bank that they聽too risky. And she wants more oversight of so-called 鈥溾�� such as hedge funds and insurance companies like the infamous AIG.
In a world where the giant Wall Street banks didn鈥檛 have huge political power, these measures might be enough. But, if you hadn鈥檛 noticed, Wall Street wields extraordinary power.
Which helps explain why no Wall Street executive has been indicted for the fraudulent behavior that led up to the 2008 crash. Or for the criminal price-fixing scheme settled last May. And why even the fines imposed on the banks have been only a fraction of the banks鈥� gains.
And also why Dodd-Frank is being聽watered down into vapidity. For example, the law requires major banks to prepare 鈥渓iving wills鈥� describing how they鈥檇 unwind their operations if they get into serious trouble. But no big bank has come up with one that passes muster. Federal investigators have found them all 鈥�.鈥�
Most of Hillary鈥檚 proposals could already have been put into effect by the Fed and the Securities and Exchange Commission, but they haven鈥檛 been 鈥� presumably because of the Street鈥檚 muscle.
As a practical聽matter,聽then, her proposals are invitations to more dilution and finagle.
The only way to contain the Street鈥檚 excesses is by taking on聽its economic and political power directly 鈥� with reforms so big, bold, and public they can鈥檛 be watered down. Starting with busting up the biggest banks, as Bernie Sanders proposes.
More than a century ago, Teddy Roosevelt broke up the Standard Oil Trust because it posed a danger to the U.S. economy. Today, Wall Street鈥檚 biggest banks pose an even greater danger. They鈥檙e far larger than they were before the crash of 2008.
Unless they鈥檙e broken up and Glass-Steagall resurrected, we face substantial risk of another near-meltdown 鈥� once again threatening the incomes, jobs, savings, and homes of millions of Americans.
This article first appeared at .
