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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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