One of the Left's most esteemed economists, the liberal Center for Economic and Policy Research's Dean Baker, claimed Monday the "Second Great Depression," the term given to what many believed the country was heading for if drastic government action wasn't taken in the fall of 2008, was all a fiction created by Wall Street to get bailed out.
In Baker's view published at the unashamedly liberal Huffington Post, the Federal Reserve could have solved all the problems that ailed us at the time, and had some of America's largest banks been allowed to fail, their financial loss would have been "our" gain as their money was magically redistributed to Main Street.
Potentially most hysterical is that Baker never once mentioned how this all occurred weeks before Election Day, and never once mentioned Barack Obama who not only hyped the collapse to seal his ascendancy to the White House, but also continually reminds Americans to this day that his efforts averted the "Second Great Depression":
Two years ago, the top honchos at the Fed, Treasury and the Wall Street banks were running around like Chicken Little warning that the world was about to end. This fear mongering, together with a big assist from the elite media (i.e. NPR, the Washington Post, the Wall Street Journal, etc.), earned the banks their $700 billion TARP blank check bailout. This money, along with even more valuable loans and loan guarantees from the Fed and FDIC, enabled them to survive the crisis they had created. As a result, the big banks are bigger and more profitable than ever.
Notice the total absence of any political figures in this accusation? Much as Obama, the Democrats, and their media minions have been doing for approaching two years, it's all Wall Street's fault.
Never mind that before Lehman's collapse and the panic it set off, John McCain and Sarah Palin had just concluded a fabulous convention in Minneapolois-St. Paul and were actually leading in the polls.
This crisis was tailor-made for the Left and the press to scare Americans into thinking the world was coming to an end, it was all George W. Bush and the Republicans' fault, and the solution was a huge transfer of power to Obama and the Democrats.
Yet Baker never mentioned the junior senator from Illinois, the elections, or the political fear-mongering going on at the time:
This was when the Wall Street boys made their mad rush for the public trough. They enlisted everyone that mattered in the effort, including Treasury Secretary Henry Paulson, Federal Reserve Board Chairman Ben Bernanke, and Timothy Geithner, then the head of the New York Federal Reserve Bank.
The line was that the economy would collapse if Congress did not immediately rescue the banks. They were prepared to make up anything to save the banks in their hour of need. Bernanke was probably caught in the biggest fabrication when he told Congress that the commercial paper market was shutting down.
Readers should notice that Baker failed to inform his readers that some of the bigger banks, most notably Wells Fargo, didn't want the government's assistance, and were actually forced to sign on to the TARP plan. This continued for the next several months as banks across the country were ordered to accept money they neither asked for nor needed.
But this was an inconvenient truth Baker ignored:
In reality, the Fed almost certainly had the ability to keep the economy going by sustaining the system of payments even if the chain of bank collapses was allowed to run its course. In the 80s Latin American debt crisis, the Fed had an emergency plan to seize the money center banks, and keep them operating, if a default by a major Latin American country pushed them into insolvency.
By the time of the Lehman crisis the financial markets had been severely stressed for over a year. The first major bank collapse had occurred more than 6 months earlier. It would have required a degree of unbelievable incompetence and/or irresponsibility for the Fed not to have devised a similar emergency plan to keep the systems of payments operating in a worst case scenario.
Furthermore, even if the Fed had been as incompetent as many claim, it would not have taken long for it to improvise a system whereby certain payments would be prioritized and the system of payments would again be up and running. The notion that we would be sitting in a 21st century economy and reduced to barter payments was an invention of the bank lobby to get the taxpayers' money.
To a large extent I agree with much of what Baker wrote in those paragraphs except for the culprits.
The Left in this nation were blind-sided by the injection of excitement the announcement of Palin as Vice Presidential candidate gave the McCain campaign. Suddenly, this was a horse race, and that's not what Democrats and their media surrogates wanted.
When Lehman declared bankruptcy on Monday September 15, and the financial markets around the world imploded, the Obama campaign and its friends in the press were quick to begin painting a picture straight out of a 1950s horror film.
We were all destined to walk the streets forever as penniless zombies if the government didn't rescue the banks and brokerage firms facing imminent collapse, and the nation bought into the fear hook, line and sinker.
Now that the world didn't come to an end as all of these folks forecast, it's become good politics for the Left and their media to blame Wall Street for taking bailout money:
There was absolutely nothing that we could have done back in September-October of 2008 that would have required that we experience a decade of double-digit unemployment. The specter of a "second great depression" is a fairy tale invented by the bank lobby to make the rest of feel good about having given them our money. [...]
Had it not been for the bailout, most of the major center banks would have been wiped out. This would have destroyed the fortunes of their shareholders, many of their creditors, and their top executives. This would have been a massive redistribution to the rest of society -- their loss is our gain.
It is important to remember that the economy would be no less productive following the demise of these Wall Street giants. The only economic fact that would have been different is that the Wall Street crew would have lost claims to hundreds of billions of dollars of the economy's output each year and trillions of dollars of wealth. That money would instead be available for the rest of society. The fact that they have lost the claim to wealth from their stock and bond holdings makes all the rest of us richer once the economy is again operating near normal levels of output.
Maybe this is all true, but it's certainly not what Democrats and the press were telling Americans in the fall of 2008. To be fair, McCain and most Republicans were also sounding the alarms.
However, the Left and their media knew full-well that depicting this situation in the most dire terms would be bad for McCain and Republicans because it was Bush and his Party getting the blame.
To this day Democrats and the press still accuse the 43rd President of causing the entire collapse despite the most pivotal pieces of deregulation occurring on Bill Clinton's watch. Notice how Clinton's name is also conspicuously absent from this piece as are the Financial Services Modernization Act of 1999 and the Commodity Futures Modernization Act of 2000.
Baker certainly wouldn't want to bring either of those bills up for then he might actually have to address some of the causes of the collapse which would divert attention away from his premise that it was all Wall Street's fault.
In the end, it may take years nay decades to determine just how close to the abyss we were that fall, and exactly what actions were warranted or just enacted out of a mixture of hysteria and political expedience.
Maybe things were not even close to as dire as advertised, and proper monetary manipulations by the Fed would have solved all or most of the financial system's problems.
But one thing's for certain: the Left and the media were aggressively fanning the panic flames, and you'd have to be a fool not to connect their behavior to the election just weeks away.
Although Baker in his opening paragraph gave a "big assist to the elite media," he chose to ignore what their clear goal was.
After all, it's not like the press are in love with Wall Street. They bash banks, brokerage firms, and the associated CEOs whenever possible.
No, the goal the media were after was Obama in the White House, and whatever fear they could help the Democrats instill in the population that furthered this end was exactly what the doctor ordered.
Yet, the story doesn't end there for this revisionist history has a future goal. The Left at this point incorrectly believes much of the anger in the electorate - especially the Tea Party - stems from TARP.
The publisher of Baker's piece, Arianna Huffington, made this pathetic claim on ABC's "This Week" back on September 12 of this year.
With this in mind, despite the absurdity of her view, it's become necessary to distance Obama and the Democrats from TARP.
Who better than a liberal economist from a liberal think tank writing at a liberal online publication?
Makes you almost need a shower to wash away the slime, doesn't it?