Who changed the financial crisis narrative?

August 14, 2011

By Matthew Goldstein

So riddle me this: How did we go from blaming “banksters” for all our financial ills to now casting teachers, cops and firefighters as overpaid government slackers who are keeping an economic recovery from picking up steam?

Somewhere, somehow, the narrative of the worst financial crisis since the Great Depression changed. Not too long ago, all the talk was about exotic securities backed by crappy mortgages, inadequate bank regulation, excessive CEO pay and burdensome consumer debt. Now the conversation in Washington and Wall Street is more focused on overly generous pensions for public employees and the levels of government spending on the poor, for education, new roads and middle class health benefits.

This isn’t too say that runaway government deficits aren’t a problem that need to be addressed–most likely with a combination of tax hikes and spending cuts. But the financial crisis didn’t begin in summer 2007 with concern about government spending.

Rather, the crisis sprung from years of loose bank regulation and ridiculously low interest rates, which fueled an unrealistic and unsustainable housing boom that encouraged people to borrow beyond their means to “buy” more home than they could afford. Homes became ATMs, through which people were also encouraged to withdraw what little equity they had to pay for family vacations and hi-tech toys. Average Americans were all too willing to participate in this canard and Wall Street bankers were all to eager to exploit it.

Sure, the federal deficit is higher than ever. But a good chunk of that is due to the fallout from the financial crisis. Super high employment means fewer tax dollars coming into the federal coffers and more money going out to pay for things to help struggling families get by–things like unemployment insurance, food stamps and yes, welfare.

The truth is that much of the current government debt crisis is simply another by product of the financial crisis–a crisis that we all played a role in bringing about. So if we are to get out of this financial slump anytime soon, it’s important to stay focused on how we got here.

 

 

8 comments

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You are absolutley right. Too bad America didn’t get the memo!

Posted by KyleDexter | Report as abusive

This is responsible journalism. Now stay with it and let’s get the conversation back on the right subject, the financial crisis and its damage to the economy and individual household’s balance sheets. No matter how balanced you want to be Wall Street was responsible. They do not complain about getting bailed out with public money and they are all doing just fine. Those who emasculated the regulatory framework and allowed Wall Street to do the damage are the same people who are now attacking the modest Dodd/Frank. Why does Wall Street and their supporters (Republicans) never accept responsibility? The answer is because they control the narrative and the Press goes right along with it. It is time the press did its job to expose those responsible for the crisis and focus attention to the right solutions and not false narratives. The solutions are obvious. Go back to what worked with strictly enforced regulations on the financial markets and restructure the broken tax system bringing back the rates that resulted in balanced budget just 10 years ago! Is that such a big challenge if Republicans really cared about the future of this country?

Posted by amj | Report as abusive

Bread and circuses….

Posted by brandonlauf | Report as abusive

Rubbish.

Public sector workers make far too much money, can’t be laid off, have pensions the rest of us can only dream about (but which we, as taxpayers, pay for) and there are FAR too many of them relative to the economy. And they produce little, if anything, of value at all.

The fact that they are now being called to account, to justify theitr cushy jobs and fringe benefits while private sector workers are being squeezed ever tighter, indicates that the problem is more than just ‘banksters’, although they have a lot to answer for as well.

Mr. Goldstein seems to feel that any criticism of public sector workers is uncalled-for – why is that? Banks and their CEOs and trading desks are such inviting, nay, EASY targets, and they’ve been carrying the can for three years now. Why should privileged public-sector workers be exempt?

Posted by Elektrobahn | Report as abusive

“it’s important to stay focused on how we got here.”
You can’t do this in a world run by spin-artists and propaganda ministers.
The ‘right’ needs a populace that is uninformed and uneducated in order to survive. They can’t have people of intelligence in their midst, because they would get hoisted on their own petard. So they must by definition demand cuts to education. They need to start wars in foreign lands to keep their military strong, so that it can be used against the citizens of the US without problems.
They can’t stand the fact that people want jobs. Jobs, so that they can have a decent life, educate their children, and provide for their families.
The right doesn’t want you to have any of this. They want to return to the days of indentured servitude, slavery, and second class citizenship for women. The days when they were the ‘ruling class’ of America.

Posted by edgyinchina | Report as abusive

The blame game gets us no where. Looking at gov’t spending in all areas is a simple back to basics approach that all businesses use to focus on the bottom line. I believe that it’s about time we got back to the basics of sound finance in running this country.

Posted by randallwayne | Report as abusive

The “bankster” narrative has been running for three years now. During this time banks have seen their profits and share prices plummet and have laid off thousands of employees. Now many of them are being sued by the Federal Government to recover the cost of securities purchased by Fannie Mae and Freddie Mac.

To date, punishing the banks hasn’t done much to improve the economy or the unemployment numbers.

Posted by Londoncomm | Report as abusive

The CFR and international banking cartels are losing traction with their ‘globalization’ agenda.

Global instruments like the UN, World Bank and IMF are losing, not gaining credibility…

Now the process must be accelerated before the US, and more importantly the ‘idea’ of the US collapses entirely.

More privitiztion is needed.. first you critisize the public infrastructure and then you replace it with a pliable private alternative.

To allow prolongued criticism of corruption and failure of the private sector invites dissent and a return to a more democratic, independant state.

These big banks are the instruments of the reserve banking system. A completely private bank that literally controls the entire economy through expanding and contracting the availability of money.

Don’t ask why we aren’t pointing the finger at the big banks and CEO’s!

Ask why we aren’t pointing the finger at the grossly corrupt ‘federal reserve’ bank.

Which is neither federal, nor does it have any reserves…

Posted by brian-decree | Report as abusive