Here’s how it works: In America the so-called free market is a joke. What you have is a bunch of big-money types making out like bandits, hustling the government to cover their bad bets while the suckers they swindle with impunity are forced to go broke. Call it Crony Capitalism or State Socialism. The labels don’t make a difference, but for the average person it just sucks.
For five years since the fall of Lehman Bros. the federal government has been bailing out the banks that caused the biggest economic crisis since the Great Depression while ignoring the well-being of everybody else. In the past few years the Federal Reserve has been pumping $85 billion a month to buy toxic assets off the books of the biggest banks. These banks should have had no legal right to sell those phony mortgage-based derivatives in the first place, except for the fact their lobbyists got the rules changed to put their scams on the right side of the law.
But despite the federal government spending $12.6 billion of taxpayer money to bail out the banks that created the mess, it’s only the wealthiest top 1% that reaped the rewards. In the most definitive recent study of income inequality, economists at the University of California, Berkeley and England’s University of Oxford concluded that by 2012 the richest 1% had skimmed off an astounding 95% of the gains in income since the official end of the recession in 2009. Thanks to the government program that bailed out the richest while sacrificing the rest, the top 1% in 2012 acquired the biggest share of income since 1928, the last time greed ran amok and Wall Street imploded. In 2012 alone the income of the top 1% went up by 20% while that of the bottom 99% grew a lousy 1%.
In September 2013 the Federal Reserve Bank of Dallas published the report “How Bad Was It? The Costs and Consequences of the 2007-09 Financial Crisis.” Three Fed analysts estimated that the recession cost Americans $6 trillion to $14 trillion—or the equivalent of $50,000 to $120,000 for every U.S. household. According to the Dallas Fed, “If the effects of the crisis are permanent, the path of consumption observed since 2007 suggests that the cost of the crisis may be more than double the $6 trillion to $14 trillion estimate.” The report also noted that “U.S. household net worth plunged $16 trillion, or 24%, from third quarter 2007 to first quarter 2009” thanks to the collapse of the housing-derivative market Wall Street hustlers had concocted.