Anniversaries are continually coming and going. They often invoke memories, either nostalgic or negative, and make us reflect on our current state of being. Each one acts as a reminder that significant events are an invariable part of life.
Sept. 15 marked the fifth anniversary of the collapse of Lehman Brothers, one of the most devastating moments of the Great Recession. This crisis resulted in millions of newly unemployed workers, deprivation of trillions of dollars of wealth and housing equity, and over $2 trillion of lost economic output since 2008. The most overwhelming consequence of the meltdown is the lack of change in the culture that led to the crisis.
The movement of deregulation began with the conservative ascendancy in the late 1980s, reaching its apotheosis with the repeal of the Glass-Steagall Act (a law separating commercial and investment banks dating back to the Great Depression) under President Bill Clinton in 1999.
As the country entered the second millennium, the contemporaneous surge of reckless government spending on the part of the states and the federal government, along with artificially low interest rates and minimal borrowing prerequisites, helped inflate the sense of economic exceptionalism-irrational exuberance as Alan Greenspan noted during a similar financial bubble in the tech industry just years before.
After the collapse of the housing market in 2006 and the subsequent financial meltdown in 2008, President Barack Obama ran for office on the platform of change and the revitalization of the American economy. The rhetoric of his campaign and the physical policy changes could not be more disparate. Obama has even kept two prominent Bush-era advisors–Larry Summers and Tim Geithner–and even considered appointing Summers to the post of Federal Reserve Chairman in 2014 until he withdrew his name on Sept. 15 due to liberal opposition.
Last month, federal regulators also repealed a provision of the Dodd-Frank Act requiring stricter reserve requirements for risky securities holdings. This was preceded by the “London Whale” incident, in which JPMorgan Chase lost $7 billion as a part of their “hedging” strategy. This method of business-characteristic of large investment firms such as AIG, Goldman Sachs, and CitiGroup-was one of the principle causes of the financial panic, and it’s notable for its inherent risk.
The intrinsic nature of this Wall Street culture in politics is the source of its longevity. Republicans courted large donors in the 80s and 90s, helping to perpetuate their already prominent rise, causing Democrats to have to cater to the same league of donors. This is especially true after the Citizens United ruling in 2010. Since there is no lobby organization or Super PAC arguing on behalf of financial stability, the preponderance of the banking culture within the government survives uncontested.
Briefly, in 2009 and 2010, there were calls to dramatically alter the financial regulatory system and economic practices of the country. The media and the general public have since moved on, but this Administration–led by the vestigial flicker of the Bush Administration–has a fundamental obligation to change the direction the country is headed. Given the passive legislation and continuation of deregulatory-era policies, I believe the efficacy of any sort of future response will be limited.