The following oped by Professor Elizabeth Warren, “Who will bail out American families?” was published in the September 22, 2008, edition of the Chicago Tribune.
The logic is impeccable.
The government bails out American International Group Inc., a private insurance company, with an $85 billion loan largely because the mortgage-related securities it insures are based on subprime loans now in default.
The government bails out Fannie Mae and Freddie Mac, which trafficked in subprime home loans, because the companies claimed to be too big to be allowed to fail.
And now we face the Mother of All Bailouts—a government purchase of dangerous financial instruments based on subprime mortgages, taking speculators off the hook and leaving taxpayers with the bill. Once again, the story is that we must do this because otherwise the worldwide financial system will crumble. And once again, the blame falls on subprime lending and the culture of deregulation that fostered it.
Lost in the headlines are the families who signed their names to subprime mortgages, not knowing or caring that the pieces of paper they signed would become one of the cards in the house of cards that now threatens the U.S. economy. No less visible are the people who have lost jobs as the economy reverses, the students who can’t pay for college without taking on ruinous loans and the millions of families who turned to credit cards and payday loans as they have been caught in the squeeze between declining wages and skyrocketing costs. They are casualties of a financial system that saw them not as customers, but as prey.
The secretary of the Treasury and the chairman of the Federal Reserve have told us that now is not the time to assign blame and that we must concentrate on preserving the bedrock institutions of our economy. But the real bedrock of that economy is the American family, countless thousands now in or facing foreclosure, families falling further behind on credit cards or paying 400 percent interest to payday lenders just to keep groceries on the table.
The logic is impeccable: The big need for protection, and the small pay for it.
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