Honest Answers about the Financial Collapse

Deregulation, Disaster, and What Happens Next
Filed under Uncategorized

Remember the “ownership society,” the catchy encapsulation of the free-marketeers’ faith in market forces? “The more ownership there is in America, the more vitality there is in America, and the more people have a vital stake in the future of this country,” President Bush proclaimed a few months before his re-election in 2004. The plan behind the “ownership society” was to take government out of the picture – deregulate everything and “make every citizen an agent of his or her own destiny.” Health care prices too high? Set up a tax-free health savings account at a newly deregulated bank, insurance company or mutual fund. Worried about whether you’ll have enough money to retire? Privatize Social Security and invest your retirement funds in…you guessed it.

Congress didn’t hand Social Security over to Wall Street, luckily. (Think about where we’d be right now if it had.) But decades of “free market” worship led to Wall Street’s invention of arcane financing schemes like “credit default swaps,” “securitization” and “collateral debt obligations,” in which loans were hacked into pieces, re-assembled into packages and sold and re-sold. A single invested dollar was leveraged over and over and over again, in a shadow system of Vegas-style speculation that operated outside any scrutiny. One of the problems we face now is that it’s not even clear who owns the mortgages, college loans and credit cards we took out. But our elected officials saw nothing wrong with this system, which made a small group of people an astonishing amount of money.

The “ownership society” today looks pretty different from the way its promoters described it. Many Americans are struggling just to hold on to their homes and jobs. Meanwhile, we are now the owners of 80% of the world’s biggest insurance company, which cost us $85 billion even though on paper it’s worthless. And then there are the other “investments” we have made recently: $200 billion in a couple of huge banks (Fannie and Freddie); $30 billion for the investment firm Bear Stearns. More billions of our money have been loaned by the Federal Reserve to other private firms that are “a little short on cash.”

The “ownership society” may end up bankrupting us.

Comments Off on What the “Ownership Society” Owns Today Posted by Harvey Rosenfield on Thursday, September 18th, 2008


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