Despite rising unemployment, tanking financial markets, and record levels of home foreclosures—with more pain sure to come—a number of conservatives are urging us to look on the bright side of the recession.
Washington Post Columnist Michael Gerson suggests that there are “hidden virtues” to the economic downturn, such as increased exercise, reduced smoking, and home-cooked meals. Preacher Morris H. Chapman sees opportunities for witnessing amid a fear-ridden nation. And many conservative bloggers and pundits are wagging their fingers through the Internet at the public, saying these hard times will teach us much needed lessons about thrift and savings.
Of course, there’s nothing wrong with any of this advice, though it rings hollow set against the massive economic crisis facing the nation—a crisis brought on by conservatives’ laissez-faire economic philosophy run amok. Consider first our present condition:
- Almost one in 10 homeowners is at risk of foreclosure—and experts say that nearly six million families could lose their homes in the next three years. It’s hard to have a home-cooked meal when you don’t have a home.
- This month’s national unemployment rate is 7.6 percent, and that number is predicted to rise to almost 9 percent by the end of the year. In manufacturing states such as Michigan the unemployment rate is 10.6 percent, the highest it has been in 25 years. It’s expected to remain in the double digits through 2010. It is hard to build savings when you’re not getting paid.
- Shrunken retirement plans, vanished pensions, and disappearing health coverage are wiping out the security of millions of older Americans, while increasing the strain on their extended families. It’s hard to sow family harmony and renewal when you’re worried about survival.
It is true, as Gerson admits, that any discussion of the recession must include “the language of morality.” Words like “excess,” “recklessness,” and “greed” apply here. But let’s be careful at whom we aim those words and make sure the laser-beam of blame isn’t too narrowly focused. If blame gets heaped upon consumers who have racked up huge credit card debt, bought houses they couldn’t afford—often, let’s not forget, because they were trying to claw their way into the middle class when wages were flat but the costs of health care, education and housing were skyrocketing—then surely a far wider beam of blame should shine upon greedy financial executives and negligent public officials whose free-market ideology and preference for the wealthy resulted in wanton deregulation and skewed policies that have ruined millions of lives.
Where to start….
First, there is former Sen. Phil Gramm (R-TX), who shielded a financial device known as credit default swaps from regulatory oversight by slipping a rule into an unrelated budget bill in 2000. That may seem so long ago, but this unregulated swap market eventually reached a peak of $62 trillion. Taking advantage of this environment, global insurance giant American International Group. Inc. issued over $40 billion in swaps that it couldn’t honor, necessitating a government rescue. To this day, Gramm refuses to acknowledge his culpability for today’s financial crisis.
Then there were the predatory lenders, snookering the public with subprime and other non-traditional mortgages. In 2001 Sheila Bair, a senior Treasury official, tried to persuade subprime lenders to adopt a code of “best practices” and allow monitors to verify their activities. According to the New York Times, “None of the lenders would agree to the monitors, and many rejected the code itself.” By 2005, subprime mortgages were a $600 billion-business and 20 percent of all mortgage originations, a sharp increase from 2001 when they were just 5 percent of originations.
And it’s not as if government officials were not aware that this was happening. In 2004, the Greenlining Institute warned former Federal Reserve Chairman Alan Greenspan that predatory lending was spreading and asked him to press for a voluntary code of conduct. Greenspan wouldn’t do it.
But wait, there’s more. In 2005, former Federal Reserve Board Governor Edward Gramlich made similar warnings about declining lending standards, and in 2006 the Government Accountability Office raised flags about the explosion of non-traditional loans. The Bush administration actively aided the explosion, as the Office of the Comptroller of the Currency exempted national banks from state laws against predatory lending.
But that’s not all the Bush administration did to unleash the greed of financial institutions. In 2004, the Securities and Exchange Commission loosened the “net capital” rule, which required “that broker dealers limit their debt-to-net capital ratio to 12-to-1.” The five investment banks that qualified for an alternative rule—Bear Stearns Cos, Lehman Brothers Holdings Inc., Merrill Lynch and Co., Goldman, Sachs & Co., and Morgan Stanley—were allowed “to increase their debt-to-net capital ratios, sometimes, as in the case of Merrill Lynch, to as high as 40-to-1.” That list—alongside AIG—is a who’s who of the firms at the heart of the financial meltdown.
The Bush administration also made a habit of appointing federal regulators who made it clear that they planned to deliver less supervision over the financial services industry. Where would we be if these regulators had actually reined in the excesses they were supposed to?
Clearly not where we are now, stuck in a seriously damaged economy whose tangled intricacies make it extremely difficult to fix. Businesses are going bankrupt. State and local budgets are getting slashed. Charities and community-service agencies are being swamped by growing local needs, even as their own budgets shrink. And families, who were once proudly middle class, are now getting their groceries at food pantries.
In the midst of all this, perky talk from conservatives about self-reliance and personal responsibility is not especially helpful. Better by far to hear the words of faith leaders and other morally courageous souls who are speaking out like the prophets of old, calling for systemic change rather than individual improvement, and for acts of justice, not charity. From pulpits to blogs, progressive leaders are speaking truth to power—and in neighborhoods around the country, faith communities are helping those in need.
God does take sides, argues Peter Laarman, executive director of Progressive Christians Uniting, and those who oppress God’s poor makes themselves into God’s enemies. Laarman goes on to say that working for economic justice means taking on oppressive structures and entrenched interests. While individuals should not be demonized, Laarman says that among the worst enemies of the poor are “conservative religious figures who cannot wean themselves from Reaganite free-market ideology, and who cannot distinguish change from charity.”
These are the progressive voices we need to hear in the coming days. Along with economic experts who are working on rescuing our embattled financial system from the deep wounds of the Bush years, or on anti-foreclosure aid, auto bailouts—and more–we can use some moral experts to articulate what a healthy economy should look like, and what its purpose should be. After all, in a democracy the economy belongs to us. And it is time to make it work for all of us again.
Sally Steenland is Senior Policy Advisor for Faith and Public Policy at the Center for American Progress. For more on this program, please go to the Faith And Public Policy page of our website. For more on the Center’s analysis of the current financial and economic crises, please go to our Economy page.