The Lingering and Ever-Growing Costs of the 2008 Financial Crisis

This week marked the five-year anniversary of the Dodd-Frank Wall Street Reform and Consumer Protection Act being signed into law. The act is still not complete as parts of it are under review or yet to be written, but it is the biggest piece of consumer protection legislation to be passed since the legislation that was approved following the 1929 crash, including the US Banking Act of 1933 that contained the famous Glass-Steagall provisions. To commemorate this anniversary, Better Markets, a financial watchdog organization, assembled a report that details, among other things, the cost of the 2008 crisis.

They estimate that we have been served a bill of at least $20 trillion dollars in terms of lost GDP through the effects of unemployment, underemployment, foreclosures, homelessness, bankruptcies, deferred retirements, premature terminations of educational programs, and so on. Additionally, “the value of the government’s total commitment of support is estimated at no less than $23.7 trillion”, of which TARP and ARRA are examples. Meanwhile, government funding of public programs and infrastructure has decreased. The American Society of Civil Engineers rates the infrastructure of the United States a D+, indicating that some $3.6 trillion additional investment in ports, roads, bridges, and the like will be necessary by 2020. And that probably doesn’t take into account the effects of climate change on public infrastructure.

Page 69 has a nifty little infographic on what rates of return Buffet, the United States, and the Wall Street Financial Services complex earned from “participation” in the financial crisis. You may recall that Buffet made a considerable amount of money through his privileged investor position with Goldman Sachs at the time, and that, since the crisis, the American public has been repeatedly told that the country “made money” off its loans to the banking industry. Then there’s the reality, in agreement with the IMF’s assessment, that our financial institutions that were too big to fail are even bigger now, and hence the potential danger is even worse than it was before.

But perhaps the best part of the report is the section, specifically pages 78-87, where the fraudulent, criminal activities of the financial institutions at the center of the crisis are detailed with the admission that not one person at any of those institutions has ever been charged and convicted of any wrongdoing whatsoever, despite the fact that there are key witnesses and an incredible amount of evidence to the contrary; and despite the reality that while the DOJ has claimed to have never found evidence of criminal wrongdoing for which individuals could be jailed, they have nevertheless managed somehow, in the years since the crisis, to find plenty of evidence on which to base multiple headline-grabbing fines of these institutions. How odd.

With that in mind, a quote:

“You had systematic fraud at the origination stage, then you had systematic fraud at the securitization stage, then you had systematic fraud at the foreclosure stage. At what point do we consider these institutions to have become effectively criminal enterprises?” ~ Art Wilmarth, George Washington University Law School Professor

We are still suffering from the fallout and will continue to do so as long as the government agencies and employees responsible for regulating the financial complex remain underfunded and incapable or unwilling to implement, uphold, and enforce pertinent laws and regulations. We never needed new rules, we needed enforcement of existing rules. But hey, “Money talks and bullshit walks”, wouldn’t you know it.

The report makes for a good, although sometimes tackily dramatic, review of the crisis and the years since. Free for download through the following link: