8 Things You Should Know About the New Lawsuit Against the Banks That Torpedoed the Economy
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Courtney Comstock said “The implication is that not just Eurozone countries are buckling under the pressure of Greece's, France's, and Italy's debts, but banks are too. It sounds like a desperate call for a bailout. Now.”
That's the problem—the financial system is global. Banks in Germany and the UK were buying mortgage-backed securities with mortgages across the US in them, and a debt crisis in Greece is making the markets shaky over here. It's a recipe for another round of financial crisis, but with austerity-mad governments in power in many countries (including our own) there's little appetite for more bailouts.
Ackermann said, "All this reminds one of the autumn of 2008."
8. More bailouts coming?
This seems fairly unlikely, but one extremely cynical take on the situation is that the suit is actually meant to be lost, providing a back-door bailout for the big banks by giving them legal precedent that can then be applied in all cases (including the 50-state settlement and Eric Schneiderman's investigation into Bank of America). This comes from Zero Hedge—or rather, one of Zero Hedge's readers, who suggests that this suit is to make Obama look like a crusader against the banks while making the case for more quantitative easing (printing money, the thing that got Ben Bernanke threatened by Rick Perry).
It's complicated, it's unlikely, and we should all really, really hope it's not what's happening. However, it's worth remembering that the “too big to fail” institutions that were bailed out the first time around have mostly, like Bank of America, only gotten bigger by purchasing other too-big-to-fail institutions with government cash. So if B of A or any of the others do fail, what happens?
Jeffrey Sica, who contributes to Forbes and runs a wealth management firm—no socialist, he—argued that the banks should be allowed to fail, pointing out their responsibility for the ongoing miserable economy:
“Banks used tax payer dollars given to them through government bailouts to sure up their balance sheets and have not contributed 1 penny to helping small businesses get on their feet and start hiring again. They have, however, contributed to our incredibly high unemployment rates since small businesses will not hire if they can’t borrow to grow.”
And Rep. Brad Miller argued, “The rule of law really does require that we pursue those claims, that people be able to pursue claims that they are harmed. To say that those claims should not be pursued or should be obstructed I think undermines the rule of law, which is more damaging to our economy than the solvency of any given bank. Our economy depends on people being able to contract and enforce their contractual rights in legal actions.”
Sarah Jaffe is an associate editor at AlterNet, a rabblerouser and frequent Twitterer. You can follow her at @seasonothebitch.