Selling Average Joe to Wall Street

Selling Average Joe to Wall Street

By Froma Harrop - July 12, 2011

Republicans want to make Americans more responsible for their own economic security while curbing the protections that would help them do it safely. A double win for Wall Street operators. Republicans deliver them a new batch of easy marks -- Average Joes who don't understand the small print -- and then let the financiers do as they please. A few guys make a quick buck milking the unsophisticated, and when the music stops, the taxpayer picks up the debris. It happens every time, and it will happen again if Republicans succeed in emasculating the new Consumer Financial Protection Board.

Here's the pattern: During the Reagan era, the deregulated savings and loans embarked on an orgy of reckless lending. This was a bipartisan disaster: Republicans wanted to free the S&Ls to invest their deposits as they wished, while the Democrats insisted on having the taxpayers guarantee the money with which they gambled up to $100,000 per account. But the Reagan administration also declawed the government watchdogs. The auditing staff of the S&Ls' regulator, the Federal Home Loan Bank Board, was slashed. And starting S&L examiners were paid only $14,000 a year.

The S&Ls collapsed, leaving the taxpayer with a $129 billion bill in 1990 dollars. That sum is not very far from the estimated $169 billion that the Fannie Mae and Freddie Mac bailouts will cost us.

Speaking of which ... the taxpayers' implicit guarantee of Fannie and Freddie mortgages enabled the twins to buy all kinds of risky loans, thus encouraging more speculation in real estate. But the George W. Bush administration fought off all efforts to the tighten rules for lending. It even stopped states from regulating subprime mortgages.

Bush was pushing his "investor society" vision, whereby the assembly line worker would happily exchange Social Security's scheduled payouts for a waltz down Wall Street. Republicans were and still are trying to privatize the program -- that is, have workers invest their contributions. Another variation on this theme is the health savings account, whereby people may invest contributions to their medical care in the stock market.

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Copyright 2011, Creators Syndicate Inc.

Froma Harrop

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