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Sunday night, September 14, 2008 at 8 pm, I sat in CNN International studios at Columbus Circle in Manhattan to comment live as Asian markets began their trading day on Monday.
We were in the midst of another series of dramatic upheavals in the global financial landscape. This weekend saw the demise of Lehman Brothers (and, as additional surprises, the bailout of the global insurer American International Group and the sale of Merrill Lynch), but the situation seemed strangely common at that time .
Some believe, even today, that the events of 2008 were notable as they announced (if not triggered) the global financial crisis, exacerbated the Great Recession already in progress, or were the inevitable chore for years of fraud and abuse by the big financial institutions.
Certainly, in some respects, they miss a more important point: in 2008, Western economies and domestic political discourse in the United States and Western Europe completely deteriorated. Changes in the global economy have had an impact on the active households of these advanced economies, leading to the credit bubble and the crash and the disillusionment and loss of economic rights of millions of people. It also led to quite unexpected phenomena: the Tea Party, the policy of fiscal austerity in the United States and Europe, the rise of populism on the left and right, and finally on the rise of Donald J Trump.
By the time the "Lehman Weekend" unfolded, the financial markets had already experienced the unthinkable. Investment bank Bear Stearns has its own "weekend" in March 2008, which has turned into a shotgun wedding with JP Morgan Chase (with the government holding the weapon on the altar) in 48 hours.
Just ten days before my departure for Asia with the Lehman newspaper on September 5, 2008, the federal government entrusted the trusteeship of the US mortgage giants under the name of Fannie Mae and Freddie Mac – nationalizing the two giants of the sector private. long supported by the implicit support of the government.
In addition, this morning, Merrill Lynch was bought by Bank of America, with an exceptional premium of 70% compared to its market value. It was a separate affair, without the government doing much more than blessing a deal that shook Wall Street, but eliminated a possible race at Merrill in the aftermath of the Lehman debacle.
After witnessing so many previous financial funerals, in the sterile calm of the modern electronic newsroom, announcing the first opening of global markets, the US government and the financial sector had just allowed Lehman to file for bankruptcy. The largest insurer of garbage-derived securities (AIG's default was a larger systemic threat than Lehman's in practical terms) seemed almost perfectly justified.
Step one: state the facts as we know them ("the government had no legal basis or was ready to nationalize a private investment bank"). Second step: Give hope ("it would not be the end of the world") and some warnings ("the huge losses accumulated in the financial system required a more aggressive action to avoid a downward spiral"). The words were familiar.
But the situation was much worse than anything I could express in a few minutes of televised jokes. A few of us who were studying the credit bubble and writing about the turnover crisis since 2007, have seen things clearly on the wall. Most of the rest of the world – many on the financial markets and certainly the government – entered almost unprepared in the Lehman weekend for what was coming and were unaware of the broader origins of the crisis.
After all, in September 2008, there was still no general consensus that the huge housing price bubble was due to excessive and often fraudulent lending by major financial institutions and credible pension funds. , insurance companies and others. their mortgage-backed securities. Linking these events to the global secular changes and systemic links that underpinned the global financial crisis was virtually unknown at the time.
In the mid-2000s, an "overabundance of global savings" had entered the economic lexicon. Outsourcing by US manufacturers and the dramatic loss of high quality production jobs in the United States have certainly been in the minds of the intelligentsia, if not the electorate . But the links between the credit bubble and the financial crisis on the one hand, and the tsunami of labor, production and surplus of low-cost foreign capital, have not been understood by economists and policy makers. In 2008, the link between these factors and the emergence of a financially deficit and fearful electorate had not yet been addressed in the general economic debate.
The doubling of jobs in the US economy, sluggish economic growth and soaring wealth and income polarization have been masked by the doubling of household debt in the years leading up to the crisis. .
But everything was there, waiting to be unmasked this Sunday of September 2008.
Ten days later, Treasury Secretary Henry Paulson knelt in front of House Speaker Nancy Pelosi, imploring him to adopt the $ 700 billion Troubled Relief Relief Program. of dollars. No senior banker has been held responsible for seemingly endless incidents of financial fraud and malfeasance.
Fifty days later, the United States elected Barack Obama to the presidency, with a decisive and historic mandate to clean up the house after eight years of Republicans delivering the United States to endless foreign wars and domestic financial ruin.
Yet the economic and financial home has never been cleaned up, while the United States has lost 8.8 million jobs, as 31.4% of homes with mortgages have fallen to levels below their debt mortgage and that household savings have disappeared.
208 days after the Lehman weekend, Americans were furious over the bailout of financial institutions by the government, and the government was providing mortgage relief to homeowners rather than lenders recognizing losses. CNBC's Rick Santelli stood on the floor of the Chicago Mercantile Exchange to demand the replacement of the Boston Tea Party, a meme that disgruntled citizens and conservative political groups from across the country almost immediately took.
The mid-term elections, two years after Lehman's Sunday, brought angry Teapartiers to Congress and a new form of right-wing populism was born. Bernie Sanders' left-wing populism, just as furious and understandable, announced, announcing that he was running for president in May 2015. A month later, Donald Trump climbed down the Trump Tower gold escalator. announce his unlikely offer. office, with the support of many voters who have issued Tea Partiers.
I did not see these things coming in September 2008, but maybe I should.
Daniel Alpert is the founding managing partner of US investment bank Westwood Capital, LLC, an adjunct professor of law at Cornell Law School, and a senior researcher in financial macroeconomics at the Law Institute. Jack G. Clarke of Cornell.
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