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Political establishment trashed consumer protections – and look what we got

by David Sirota
San Francisco Chronicle

Please, forgive me for saying it. I know it’s a tad annoying, but it has to be said to America’s ruling class in this humble column space. Because if it’s not said here, then you can bet it won’t be said anywhere else, and it needs to be said somewhere on behalf of the millions of citizens who were right.

We told you so.

In the slow-motion train wreck that became the economic meltdown, our bipartisan political establishment and the sycophantic punditburo have been wrong over and over and over again. They told us that eviscerating consumer protections would unleash the market’s benevolent power and boost the economy. They told us that a trillion-dollar Wall Street bailout would solve a credit crisis. They told us that bailout would be subjected to intense oversight and scrutiny. Wrong, wrong and wrong – and when critics predicted just that, sneering commentators and congressional leaders berated us as know-nothing Luddites, conspiracy theorists or both.

But with the release of three new reports, there’s no debate anymore. The studies prove that the critics were right and the ideologues of Washington were wrong.

When in 2005 Congress overwhelmingly passed a credit-card industry-written bill gutting bankruptcy laws, progressives were right to try to stop it – and not just because it was an immoral move to legalize usury. We were right because as the New York Federal Reserve Bank reports, the bill played an integral role in the foreclosure surge that crushed the economy.

In the past, bankruptcy laws made sure debtors first and foremost continued paying their mortgages so that they could stay in their homes. But the 2005 legislation effectively compels debtors to first pay off their credit cards, meaning many then have no money left to pay their mortgages. The Fed’s report estimates that the bankruptcy bill is causing 32,000 more foreclosures per quarter than the economy would have already generated.

We told you so.

When almost every media voice in America was sounding the alarm of financial panic and demanding a Wall Street bailout plan, when bailout opponents were roundly ridiculed as “irresponsible” by politician and pundit alike – those opponents were nonetheless right to say then what a study from the Minneapolis Federal Reserve Bank says now: that the case hadn’t been made.

While reporters and the Bush administration frantically insisted that bank-to-business lending had ceased, inter-bank lending had stopped, and short-term “commercial paper” loans had dried up, the Minneapolis researchers tell us that “all three claims were false” and continue to be false; that “nobody has explained how the money system has frozen when the data says it has not”; and that “a trillion-dollar intervention warrant(ed) a bit more serious analysis.”

We told you so.

When lawmakers said the bailout included strict oversight measures, skeptics were right to say that claim was patently untrue. According to a new analysis by federal officials at the Government Accountability Office, nonexistent oversight means “taxpayers may not be adequately protected” and that the bailout’s stated goal of fixing the economy “may not be achieved in an efficient and effective manner.”

Yes, we told you so.

And so now, even though these damning reports have garnered scant news coverage, perhaps there will be a change. As we – the pragmatic progressive majority – demand tough new financial regulations; job-creating investments in public infrastructure; labor law reforms; universal health care; revised trade policies; a repeal of the odious bankruptcy bill and an end to Wall Street welfare – maybe our humiliated rulers will start listening.
To read the reports

For the underlying documents, go to:

Federal Reserve report on the effect of the bankruptcy bill.

Federal Reserve report on the myths of the credit crisis.

GAO report on the oversight of the bailout. (PDF)

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