When the 2008 financial crisis hit, I supported the bail outs of the banks. This is the second time in my life that I’ve been struck by a failure to imagine just how corrupt our political system really is. Toward the end of the Bush regime, my friend Laura pointed out that all of the things we were afraid of prior to Bush being appointed President are almost hilarious in hindsight. We were so naive. What actually happened during those 8 years was just beyond our capacity to imagine at the time. To my knowledge, the only person who mostly got it right with Bush was Molly Ivins and even she didn’t foresee the apparently Cheney inspired, neo-con security state.

In 2008, I failed to imagine that the banks would get the money, essentially, with no strings attached. Even the one slight string that was attached (compensation limits until they’d paid the money back) was attacked as if it were the foot in the door to resurrect Stalin and install him in the White House. I failed to imagine that, within two years of their near collapse, they would be right back to doing what they had done for the two plus decades prior: helping to bust unions, cut taxes for the rich, slash benefits for the rest of us, drive the country into crippling debt, and leech off as much money from everyone they come into contact with as possible. From the perspective of a person who actually cares about human suffering, it made sense to support the bank bailouts. You’ll never convince me that letting a few more of them fail wouldn’t have dropped us right into a Great Depression style economic collapse. I don’t think 20 or 25 per cent unemployment would have been unlikely at all. Here’s the rub, though. Without those string, without major reform, we have guaranteed that there will be another bank crisis. It is not a historical accident that we managed to avoid a major banking crisis from the end of the Great Depression to the Savings & Loan scandals of the 80s. We had regulations in place that prevented bank crises. Until that next crisis comes, the finance industry will continue to undermine the living standard and the safety net of the average American. The next time the banks collapse, we ought to let them. We can give them the choice of going under or being nationalized, but either way the current owners should forfeit their investment. That includes me if my 401k is invested in them. Nothing short of a whole sale restructuring of our financial industry is going to stop the US from sliding toward being a third world country.

WaMu collapsed tonight. It was seized by regulators and its deposits were purchased by JP Morgan Chase. Biggest bank failure in US history.

I haven’t really seen this highlighted yet, but it’s been a busy week for me where I haven’t had time to read other political blogs. In a lot of right wing analysis of the current financial meltdown, they seem to be trying to shift the blame to “1930s era regulation” or “depression era regulation”. I’ve seen several McCain surrogates, including Sarah Palin use this formulation this week. It’s impressive, at times, how focused the GOP is on its long term missions. One of those is to completely discredit anything from the New Deal era. That gets easier as fewer and fewer people who were alive during that era are around now to give first hand dispute to that shit. The Republican Party is currently laying the groundwork, rhetorically, to blame this crisis on regulation and set the stage for more deregulation as soon as it is politically palatable. They, of course, have it exactly wrong. It has been the repeal of New Deal era regulation that has led to this. It has been an intentional failure to extend the existing New Deal era regulation to the new financial services that have grown up in my lifetime that has led to this crisis.

New Deal era regulation would have prevented this stuff if it had been left in place.

According to the Wall Street Journal, state and federal regulators have stepped in to shut down Silver State Bank, largely because the results of its exposure to risky real estate loans. I’m starting to think I should add a new category for posts about failed banks. Actually, I think I will. Yikes.