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Wall Street Wins – Again: Bailouts in the Time of Coronavirus

The catalyst for this crisis is obviously in a different league than in 2008, since a viral pandemic is hardly nature’s equivalent of a subprime meltdown. But with an economic system already on the brink of crashing, one thing will prove similar: instability for a vulnerable majority is likely to be matched by nearly unlimited access to money for financial elites who, with stupendous subsidies, will thrive no matter who else goes down.

Once the virus recedes, stock and debt bubbles inflated over the past 12 years are likely to begin to grow again, fueled as then by central bank policies and federal favoritism. In other words, we’ve seen this movie before, but call the sequel: Contagion Meets Wall Street.

Unlike in 2020, in the early days of the 2008 financial crisis, economic fallout spread far more slowly. Between mid-September of that year when Lehman Brothers went bankrupt and October 3rd, when the Troubled Asset Relief Program, including a $700 billion Wall Street and corporate bailout package, was passed by Congress, banks were freaked out by the enormity of their own bad bets.

Yet no one then should have been surprised, as I and others had been reporting that the amount of leverage, or debt, in the financial system was a genuine danger, especially given all those toxic subprime mortgage assets the banks had created and then bet on. After Bear Stearns went bankrupt in March 2008 because it had borrowed far too much from other big banks to squander on toxic mortgage assets, I assured listeners on Democracy Now!that this was just the beginning -- and so it proved to be. Taxpayers would end up guaranteeing JPMorgan Chase’s buyout of Bear Stearns’s business and yet more bailouts would follow -- and not just from the government.

Read entire article at TomDispatch