Minnesota 2020 Journal: Investing in the 99%
I’m not a conspiracy theorist. I believe that Lee Harvey Oswald acted alone. I believe the Apollo moon landing happened on the moon. I believe Big Foot is a guy in a gorilla suit. Yet, when I learn that America’s banks received genuinely sweetheart bailout deals, it ignites a slow burn.
The Occupy protestors have it right. The fix is in.
Bloomberg News reported last week that, according to analyzed Federal Reserve Bank data, the Fed provided critical capital liquidity transfers to America’s largest banks. At peak periods during the 2007-2009 credit crisis, our nation’s six largest banks borrowed a half trillion dollars from the Fed. Those same institutions accounted for 63 percent of average daily borrowing. On December 5, 2008, the high water borrowing mark, banks borrowed $1.2 trillion just for the day.
Further detail only colors and shades a well-known picture. We all know that America’s largest banks had their bacon saved by swift federal action. It was the right thing to do. The only thing worse than saving greedy, overbearing, delusional banks is creating a cascading financial collapse. However painful and dispiriting, hundreds of millions of people would’ve been significantly harmed, losing all or some of their life’s savings.
Remember, we’re a nation of 300 million people. I don’t use the term “hundreds of millions” lightly.
The bailout, in that regard, doesn’t bother me. Instead, I’m bothered by the secrecy shrouding the entire affair. The Fed didn’t want to give up its data. The detail contained in the Federal Reserve’s internal figures required a prolonged Freedom of Information Act request fight. Now, reading Bloomberg News’ report, I can see why.
Banks received more money that we thought with less oversight than we’ve been led to believe. Even Congress didn’t know some of the details. Then, critically, banks down played the lending detail in reports to their shareholders. The Fed kept mum.
In the following period, from 2009 to the present, banks aggressively lobbied against increased regulatory oversight. They worked to block increased disclosure rules, both to investors and to the public. They did so using financial resources preserved through swift public assistance. It’s not as simple as saying that banks used bailout funds to argue that they shouldn’t change their operating, asset disclosure and reserved requirement rules but, yeah, that’s kind of what happened. Had the banks been allowed to collapse, they wouldn’t have been around to lobby against greater public oversight.
Of course had all of those banks collapsed, increased financial institution regulatory oversight authority would’ve been the least of our problems. Bank runs and economic chaos are truly destructive phenomenon.
But, assessing the Federal Reserve’s recently disclosed lending data, it’s clear that banks were bailed out with a determined sense of purpose. Then, when families and individuals caught in the financial crisis sought the same help, that determined sense of purpose was tasked to blocking assistance.
Is it any wonder that we’re feeling frustrated and distrustful?
I expect to see this dynamic repeated during Minnesota’s upcoming legislative session as state policymakers grapple with two large proposed financial investments: a state bonding bill and a Vikings football stadium financing bill.
The state bonding bill is traditionally considered during the second of Minnesota’s two legislative sessions. It’s the mechanism used to borrow money through state bond sales for capital investments like road, bridge, and air and water service infrastructure as well as for state buildings. A stadium financing bill would issue state bonds to pay for the public investment in a Minnesota Vikings football stadium.
Politically, the two shouldn’t be linked but they will be. If we can afford hundreds of millions for a football facility, the argument will assert, why can’t we afford the things we need?
That’s a fair question. The answer reveals conservative “no new taxes” policy’s fatal flaw. By refusing to consider state revenue increases or even tax policy reform, conservatives put the interests of Minnesota’s highest income earners ahead of Minnesota’s other 99 percent. Bonding political machinations and policy debate will make that dynamic easier to observe and understand.
In the past ten years, conservative public policy initiatives have decreased state public school investment by 14 percent. Local property taxes have skyrocketed while services are slashed. Road reconstruction backlogs build. Healthcare costs push past families’ capacity to pay. These shifts are restructuring Minnesota’s economy and not in a good way.
It’s not too late focus on what really matters. If Minnesota’s public policymakers make public schools, affordable healthcare, robust infrastructure and economic development priorities, Minnesota can return to renewed growth and prosperity. We can, should and must invest in Minnesota’s proven assets. It’s what we can do, here and now.