Why Banks Should Be Held More Strictly Accountable for 2008
Certain financial writers are predicting, with increasing alarm, that the U.S. economy may soon be headed for a recession – the second in just over a decade. Signs like long-term bond interest rates dropping below short-term interest rates are thought to be indicators of economic downturn. As the noise grows louder on whether to prepare for recession or to pay no mind to these abstract market movements, there are similar tones and market circumstances to the 2008 financial crisis that are worth remembering.
Twelve years ago, the American people were told by then Fed Chair Ben Bernanke not to worry about issues with the subprime mortgage market, because they were “limited” and would not have any effect on other markets. It took less than a year for four major financial institutions to collapse under the weight of the crisis caused by those so-called limited problems.
It is incredibly disappointing that in the decade since these problems began, the same practices used by banks labeled as “too big to fail” are still prevalent. They have not been forced to pay back the consumers they stole from – some even profited from the recession by obtaining bloated bailouts that paid C-suite paychecks. Meanwhile, average Americans lost jobs, retirement savings, and houses in record numbers.
This “too big to fail” mentality is detrimental to the security of our economy and perpetuates the culture of bad behavior in big banks. It relinquishes these institutions’ responsibility to their consumers by promising a government-funded safety net, regardless of their detrimental procedures.
In fact, in recent years, legislation further deregulating the banking industry has passed Congress that continue to allow for big banks to run amok without proper oversight and an unwilling system to hold them accountable for their bad faith actions. The Trump administration and Congress have teamed up with big bank executives to set the American people up for additional losses as a result of the next crash.
For example, Countrywide Financial, bought by one of the largest banks countrywide in January 2008 for $2.5 billion, is known for its shady tactics of encouraging risky behavior because in the pursuit of profits while passing off the burden to taxpayers if their risky investments did not pan out. When there are no consequences for making bad decisions, it eliminates any risk and encourages the gambling of Americans’ hard-earned dollars.
Allowing deceptive tactics to go unquestioned and unpunished will inevitably lead to undesirable outcomes. Without proper regulation and oversight of these large financial institutions, a repeat of the 2008 crisis or something similar are inevitable. Even today, more than ten years since the financial crisis, banks like Bank of America continue to drag out their legal cases and refuse to acknowledge their past wrongdoings. Regulators and the courts have a responsibility to end this decade long legal delay by these banks and bring about a resolution in search of justice for those that were so deeply impacted by their actions.
What should have been done years ago must be done now: regulate big banks to hold them accountable for their actions that have hurt consumers for over a decade. These banks may have been able to create a “too big to fail” label for themselves, but no company or institutions should be beyond reproach when they use deceitful tactics that hurt the American people without having to face the consequences. We have not forgotten what happened in 2008 and it is up to Congress and regulators to remain vigilant to ensure that consumers rights and interests are put ahead of the profit interests of the big banks.