Lehman Brothers & the Ongoing Financial Crisis

Matt Stoller, writing at New Deal 2.0, on the third anniversary of Lehman Brothers’ bankruptcy.

Why should anyone think that Lehman won’t happen again? Elites have learned nothing. This was obvious during the crisis itself, when Nouriel Roubini noted the stark difference between public and private conversations:

And while policy makers and regulators now claim that everything is on the table in terms of reforming a faulty financial system they stress in private that their preferred approach would be one of “self-regulation” and reforms undertaken by private financial institutions rather than new rules and regulation imposed by authorities.

Many people are frustrated that the response to the crisis hasn’t been stronger. But it was always obvious that the goal of the crisis measures was to get the financial elites back to ordinary business as quickly as possible. In that context, the most reasonable question in the world is, why wouldn’t Lehman happen again? We don’t have a persuasive answer to that question. And until we do, we’re still in crisis.

I think this is exactly right and we’re seeing it play out on a daily basis. Rather than enact policies that lift people up and rebuild the conditions necessary to create consumer demand, politicians in the US are pushing for austerity that enriches wealthy elites. Rather than make banks take losses in Europe, the citizens of Greece, Spain, Portugal, Italy, the UK and Ireland are being forced to suffer. It’s all about maintaining normalcy for financial elites, who are at most asked to spend some time thinking about how they might police themselves or make minor changes to reduce the chances of needing massive public bailouts in the future. As this is essentially a bridge to far for the finance industry, nothing is actually changed, we remain in crisis, and the chances of another major bank collapsing are as real as they were on 9/14/08.

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