Musings & Sparks

Public Paying Price for Private Losses

After the financial crisis of 2008, the government didn’t have the political will or foresight  to stop the transfer of wealth to the super rich.  This occurred through the bank losses being taken on by the government through bailouts and purchase of troubled assets (TARP).  Immediately following those charitable acts from the government, the banks turned around and awarded large bonuses to the same people responsible for the crisis.

The government now finds itself with a massive deficit due to both the bank bailouts and the need for massive stimulus to prevent the crisis from causing an all-out depression.  The only way out from the crushing deficit is to cut (and cut deep) or destabilize the currency by having the Fed print its way out of this.  Either way, the losses originating from the banks will be felt by all Americans as deep government cuts, higher taxes, or inflation.  The Republicans have clearly advocated for deep government cuts.

Obama was slow to realize how these events transferred wealth to private hands as evidence by his willingness to extend the Bush tax cuts.  Instead, Obama should stand-up for the lower and middle-class by creating a fairer tax code  while at the same time restricting bank bonuses, requiring mark-to-market accounting and refusing the banks requests to reinstate dividend payouts until they’ve built up sufficient reserves and show that they can handle their own losses.