Confusion. Confusion everywhere. Confusion in the House itself and in Question Period. Confusion in caucus meetings. Confusion in the various committees. Confusion at events. Confusion when socializing with other MPs. Confusion in calls home to spouses and children. Confusion from the top leadership levels to the lowliest backbencher. Confusion among economists. Confusion among bureaucrats. Confusion in the media and among citizens. Again, confusion everywhere.
A decade ago I was sitting in Parliament – one of slightly over 300 MPs trying to figure out what just hit us. Had the American stock market crashed? Was Wall Street doing anything? What about Canadian securities? Is this going global or confined to America?
It didn’t take long to understand that the Great Recession of 2008 was upon us and, like politicians everywhere, we had little idea of how to handle such a complex fallout on a grand scale. We were briefed and briefed in Parliament because we were clearly going to have to pass some temporary stimulus measures to keep working Canadians at their jobs. The minority Conservative government proposed incentive measures that were largely supported by opposition members and we made sure that the Canadian banking system was protected from becoming the kind of frontier town the American financial system had become. We all learned a lot about economics in a rushed period of time.
That was a decade ago and witnessing it from inside the corridors of power wasn’t much different than out in the streets. Everyone, from top to bottom, from fringe to centre, felt vulnerable to the tsunami of events flowing over from south of the border. As complex as it was in Ottawa, it must have been havoc in Washington.
In collective disappointment similar to David Halberstam’s The Best and the Brightest, concerning the political and financial leaders managing the Vietnam War, it was clear that the experts put in place to keep something like this from happening somehow got it terribly wrong. There is no need to reiterate here the reasons why none of this was an accident. In books like the gripping Too Big to Fail,we now know that what transpired in 2008 was just bad and greedy capitalism – a giant Ponzi scheme fueled by risky sub-prime mortgages that any good financial officer would have avoided like the plague.
The precarity and foolishness of what was going hadn’t gone unnoticed. There had been powerful financial voices out there who shouted their warnings for five years. But so much money was being made overnight that finance officials couldn’t stop the spigot of avarice that had saturated the market. Investors like pension companies, insurance firms and hedge funds backed these flimsy mortgages. Recent research reveals that most sensed it was a con job, but rushed into the fray regardless, not wanting to miss out on the windfall.
The giant banking institutions, who helped to bankroll it all, were judged by federal regulators as being just too big to fail. If they were permitted to crash through their own greed, the feeling went, then the entire system would collapse and “boom,” capitalism itself would have been wiped out.
All this is complex stuff, but a decade on has seen millions of American citizens, and to a lesser degree Canadian investors, wizen up to what happened to their savings as a result of the greed. That’s important because it has meant that financial institutions are largely seen as unaccountable machines for making money for the wealthy few. The public never knew what fully happened in those turbulent months, but they know it was a botched job and that the ultimate victims were the average citizens whose savings had been largely lost. Populism is born in moments like these.
Perhaps worst of all: little has changed. The entire disaster saw some $5 trillion dollars of public dollars granted to these firms to keep them afloat, along with some $16 trillion in guarantees of public backing. That money was the public’s and it was forever gone, gouged out of services that should have been theirs but which went to the culprits. It was a mobilization of money the likes of which hadn’t been seen since the Second World War, and even exceeded that. The bailing out of the large financial firms all but wiped out smaller lending agencies because they simply couldn’t compete with that kind of public bailout money heading to their large competitors.
The guilty are mostly still in business and virtually none of them went to jail. The big banks presently pay little to no tax. The companies that were too big to fail are now even bigger in size and less regulated, though some have morphed into other firms. The financial elite kept their jobs, with huge bonuses in addition, while hundreds of thousands of jobs of average citizens fell by the wayside. In 2008 alone, almost one million American families lost their home, with another 11 million in serious mortgage debt.
In any world other than global finance such actions would be regarded as criminal. But in the strange alternative universe that is now elite capitalism, those guilty of such massive losses were, and are, primarily the supporters of Donald Trump. This is tough, since they are pushing the president to relax regulations even further, leaving them increasingly open to an even more serious financial fallout than the Great Recession.
All this transpired a decade ago this week and it appears as though the financial elite, not just in America but globally, are on the cusp of making it happen all over again, only this time with less oversight from a deeply divided politics. Nothing has changed, except maybe the form of deeper distrust average people have for financial and democratic institutions of all varieties. All that will be put to a deeper test with the global financial fallout about to descend on us all.