How it went down: Three accounts of the Lehman bankruptcy


By AFP
Published September 10, 2023

The defunct Lehman Brothers company sign is sold at Christie's auction house in London - Copyright AFP Ben STANSALL

Elodie MAZEIN

A key catalyst for the 2008 global financial crisis, the bankruptcy of Lehman Brothers still reverberates for those who lived through it. Here are the accounts of three who were there.

– Paolo Battaglia, neophyte banker –

After interning in the summer of 2007, the young Italian felt mainly excitement in July 2008 at landing a job in Lehman’s private equity division in London.

“It was the start of a new adventure, my first job out of school,” Battaglia recalled. “At the time, Lehman was a prestigious and rewarding place to work.”

“Of course, I was aware it was not an easy moment for the industry and for Lehman in particular, but until the very last day, nobody expected Chapter 11 as a realistic outcome,” he said, referring to bankruptcy protection proceedings.

When it became clear Lehman would not survive as a stand-alone entity, the thinking was that it would be acquired by another heavyweight such as Bank of America or Barclays.

But on Monday, September 15, 2008, Battaglia and other employees arrived at the office to find bankruptcy administrator PWC distributing leaflets in the lobby, “basically instructing employees not to enter into any transactions anymore,” he recalled.

Everything changed overnight.

“It was a surprise that things stopped so abruptly,” said Battaglia who considered himself lucky to have worked in a division that was more shielded from the layoffs.

He worked through mid-2010 for a fund that was bought by Lehman colleagues before moving to Goldman Sachs, where he still works.

“I got the best I could have in a very unfortunate situation. The options were very limited.”

“I am sure events were thoroughly scrutinized and if nobody was charged it was because there was no crime,” he said. “We tend to associate bankruptcies with crime but it was just another business venture going bad.”

Battaglia views the recent crises hitting Credit Suisse and a slew of US regional banks as completely different, saying, “there are much more policy tools and experienced knowledge of regulators and markets to manage this kind of situation than 15 years ago.”

– William Dudley, troubled regulator –

William Dudley had a full schedule on the weekend before Lehman Brothers’ Monday morning bankruptcy — first a conference at Princeton University, then the wedding of a friend attended by associates in finance.

Dudley, who was vice president of the Federal Reserve Bank of New York at the time, went ahead with these events.

“You can’t really start cancelling things because that makes people even more nervous about what’s going on,” he said. “It was very strange going to the wedding and acting like nothing much is going on.”

Dudley had spent the early part of Saturday morning working on a plan to save Lehman.

“In reality, the story for me begins a bit earlier because Dick Fuld was on the board of directors of the Federal Reserve of New York so I had some interactions with him through 2007 and 2008,” Dudley said of Fuld, who led Lehman from 1994 until its demise in 2008.

“I was quite concerned that (Fuld) was in denial about the risks that the economy was facing, the financial system in general and Lehman Brothers in particular.”

Dudley shared his views with colleagues in the summer of 2008, but “my memo landed with a resounding silence,” Dudley said.

When Lehman filed for bankruptcy protection, the initial reaction “was not that bad,” Dudley recalled.

But the situation quickly shifted into a contagion as investors rushed to withdraw funds and cover their exposure.

Could Lehman have been saved?

“Right behind Lehman, there were other (groups) in trouble like AIG,” said Dudley.

“Maybe I should have been more forceful,” he said. “But it might have been too late already.”

But recent bank troubles have been more visible compared with 2008, Dudley said. “You actually knew why the firms were getting into difficulties.”

– Oliver Budde, whistleblower –

Oliver Budde resigned from Lehman Brothers in 2006, troubled by company practices. But the attorney was back at Lehman on the fateful morning when the firm filed for bankruptcy protection.

“I was actually at the building on the Monday morning when pandemonium broke out, when everyone started walking out with their stuff,” he recalled.

There was “a lot of sadness, a ‘can’t believe this is happening’ sort of shock,” he said.

In the early afternoon, Budde spotted Fuld “sneaking out the back way and leaving in his black Mercedes limousine with his own driver.

“I took a picture,” he said. “It’s a souvenir for me.”

Budde, who was living in Vermont at the time, spent the evening commiserating with former colleagues.

“I had seen that these men were not to be trusted,” he said. “In one sense, I was vindicated by Lehman’s bankruptcy.”

Budde had left his job as vice president and assistant general counsel in 2006, troubled by what he saw as tricks that top executives used to inflate their compensation and not disclose it to investors.

The firm made no changes even after regulators revamped the rules in 2008 to improve transparency.

“It was still hidden,” he said. “It was outrageous to me. So that’s when I became a whistleblower.”

Between April and September of 2008, Budde sent five emails to US authorities, while copying Lehman’s board and legal staff.

“No one ever contacted me, even afterward,” Budde said.

“I’m quite proud of my actions. I did the right thing by reporting my concerns to the authorities.”

Lehman could have been saved through a managed sale to Barclays, but the British firm “got a much better price” for major Lehman assets it acquired during the bankruptcy proceeding.

The worst market crashes


By AFP
September 11, 2023


The global pandemic caused stock markets around the world to crash in 2020 - Copyright AFP/File TIMOTHY A. CLARY

Fifteen years ago, on September 15, 2008, the Lehman Brothers investment bank went bankrupt, a victim of the global financial crisis during which stock markets crashed.

Below is a reminder of the other major crashes in history:

– 1637: Tulip mania –

The first speculative bubble of modern history involves exotic tulips. Prices for coveted varieties of the flower soar in the Netherlands at the beginning of the 17th century before the bubble bursts in 1637.

The blooms lost nine-tenths of their previous value.

– 1720: South Sea Bubble –

In early 18th century England, people are falling over each other to buy shares in the South Sea Company, set up to trade in slaves with South America and restructure the public debt.

When the shares crash, many investors are ruined.

– 1882: French crash –

The French economy suffers its worst crisis of the 19th century following the collapse in January 1882 of the share price of Union Generale bank which causes the Paris and Lyon stock exchanges to crash.

– 1929: Wall Street collapse –

October 24, 1929 becomes known as “Black Thursday” on Wall Street after a bull market implodes, causing the Dow Jones to lose more than 22 percent of its value at the start of trade.


Wall Street: — © Digital Journal

Stocks recoup most lost ground during the day but the rot has set in: October 28 and 29 also see huge losses in a crisis that marks the beginning of the Great Depression in the United States and a global economic crisis.

– 1987: Black Monday –

Wall Street crashes again on October 19, 1987, on the back of large US trade and budget deficits and interest rates hikes.

The Dow Jones index loses 22.6 percent, causing panic on markets worldwide.

– 1998: Russian crash –

In August 1998, the ruble collapses due to speculation linked to falling oil prices and the ripple effect of the 1997 Asian economic crisis.

Moscow declares a 90-day moratorium on the payment of its foreign debt and cannot borrow again on international markets for over a decade.

– 2000: Dot.com bubble –

The start of the millennium sees the deflation of the tech bubble caused by venture capitalists throwing money at unproven companies.

From a record 5,048.62 points on March 10, 2000, the US tech-heavy Nasdaq index loses 39.3 percent in value over the year.

Many internet startups go out of business.

– 2008: Subprime crisis –

The 2008 global financial crisis is caused by bankers in the United States giving subprime mortgages to people on shaky financial footing and then selling them off as investments, fuelling a housing boom.

When borrowers become unable to pay their mortgages, the stock market crashes and the banking system buckles, culminating with the dramatic bankruptcy of Lehman Brothers.

Millions of people lose their homes.

– 2015: Chinese boom-bust –

The popping of a Chinese stock market bubble in the summer of 2015 causes the benchmark Shanghai index to plummet by over 40 percent over several weeks, despite government intervention to try to stop the crash.

– 2020: Pandemic –

Global stocks crash in March 2020 after the World Health Organization declares Covid-19 a pandemic that will put much of the world under lockdown.

The Dow Jones loses 26 percent in four days, one of its biggest-ever drops.

But the rapid response by national governments, which dig deep to keep their economies afloat, helps most markets rebound within months.

US judge says 2008 bank fraudsters got off easy


By AFP
September 11, 2023

Judge Jed Rakoff says the US government failed to impose meaningful punishments on senior bankers involved in the 2008 financial crisis 

- Copyright AFP TIMOTHY A. CLARY

John BIERS

US officials took a victory lap last month to commemorate their response to the 2008 financial crisis, pointing to $36 billion in fines as proof that banks have been held accountable.

But to US District Judge Jed Rakoff, who has criticized the Department of Justice (DoJ) for not criminally prosecuting senior bankers, such fines amount to an “easy cop-out” failing to achieve justice or discourage future chicanery.

“I don’t think it has a meaningful deterrent effect,” Rakoff told AFP as he reflected on the government’s enforcement record 15 years after the Lehman Brothers bankruptcy.

“For the company, it’s a cost of doing business,” Rakoff said.

Rakoff bases this assessment in part on his 15 years in corporate law before being named to the bench.

The corporate defendants Rakoff represented made a “huge distinction” between financial penalties and prison time, seeking to avoid the latter at all costs because they’d “heard how terrible (prison) is,” he recounted.

“And so it follows from that, if you are fairly confident that, even if you don’t get away with it, the worst that will happen is your company will pay a lot of money, then you’re much more ready to go and do it,” said Rakoff.

He added that he wasn’t familiar enough with the details to comment on the bank failures earlier this spring that spurred emergency actions by the Federal Reserve and other regulators.

“To me, it’s a matter of simple morality,” Rakoff said. “Companies do not commit crimes in the moral, intentional sense. It’s individuals within the companies who make the decisions that ‘we’re going to do the wrong thing here, because it’s going to make our company a lot of money.’

“And those are the moral failings that need to be punished.”

Consistently going soft on corporate criminals puts at risk the reputation that US markets “are among the most honest in the world and the most reliable,” Rakoff said.

“And when you have fraud that goes unprosecuted over time, it tends to undercut that confidence. And that is a serious, I think, problem for the United States.”

– Speaking out –

Appointed to the US District Court for the Southern District of New York by former President Bill Clinton in 1996, Rakoff is known for publicly taking on major judicial dilemmas more than colleagues.

He garnered attention in 2002 when he issued a ruling that found the death penalty unconstitutional, a decision that was quickly overturned on appeal.

Rakoff emerged as a critic of the government’s enforcement approach to the 2008 crisis, blocking a $33 million Securities and Exchange Commission settlement with the Bank of America.

In a scathing ruling, Rakoff in September 2009 dismissed the case as a “contrivance designed to provide the SEC with the facade of enforcement, and the management of the bank with a quick resolution of an embarrassing inquiry.”

While Rakoff later approved a modified settlement, citing the need for judicial restraint, he won praise as a rare check on Wall Street at a time of public rage against Big Finance.

After consulting court officers, Rakoff in 2014 began publishing essays questioning the enforcement response to the financial crisis, and in 2020 he authored a book critiquing the US justice system and addressing issues such as mass incarceration.

The DoJ last month announced that Swiss-based investment bank UBS would pay $1.4 billion to settle US charges that it defrauded investors in the sale of mortgage-backed securities.

The DoJ’s original complaint quoted a UBS mortgage official as referring to a pool of loans as “a bag of sh[*]t,” and another employee as calling a group of loans “quite possibly better than little beside leprosy spores.”

The UBS case marked the final major settlement under a DoJ-led working group established in 2012. The DoJ cited $36 billion in civil penalties as bringing accountability to “those who break the law and undermine the well-being of American families,” said an agency press release.

But Rakoff, a former federal prosecutor, likened such fines to a slap on the wrist — a retreat from the prosecutions in the early 2000s of top executives from Enron, Worldcom and other companies.

Limited resources explain some of the change, with DoJ focusing more on terrorism cases after the Sept. 11, 2001 attacks, Rakoff said.

A bigger issue is a shift in strategy. Prosecuting CEOs involves a painstaking process that typically requires charging people lower in the company and getting them to cooperate to catch a big fish.

“But those are hard cases to make,” Rakoff said. “They take a long time and sometimes you won’t be able to prove it in the end.”

By contrast, it may take six months to get a settlement, and “you can have a big splash in the papers: ‘Today Bank X pled guilty to a criminal offense and paid $5 billion.'

What Goes Up...

Must come down. And of course its not a recession...pleads the powers that be...it's a correction.......or maybe it's just fortunes fate (being lady luck and her magick number seven).....actually it's worse than either a correction or recession it's pending stagflation.

Toronto Stock market takes biggest one-day plunge in seven years

TSX suffers worst week in seven years

Stock markets sustain even more losses Friday

Where to find a foothold amid downward spiral

Stock markets crash, Sensex tanks 1440 pts
Hindu, India -
Mumbai (PTI): The stock markets went into a downward spiral at mid-session on Monday, with across the board selling pressure that shaved off 1440 points ...

MARKETS CRASH ACROSS EUROPE Experts Warn of Stock Market Hysteria
Spiegel Online, Germany -
The trigger for the market crash was the news from WestLB on Monday morning. Over the weekend, the bank had to admit to a billion-euro capital requirement ...
World Stock Markets Crash
Arab News, Saudi Arabia -
DUBAI/LONDON, 22 January 2008 — Global stock markets plunged yesterday, with Tokyo tumbling to its lowest level in more than two years as US President ...
US Stock Markets Crash and Burn Whilst The Fed Fiddles
US Stock Markets - Near Term Bottom or Waterfall Crash?

Hauntingly Familiar
Here we are once again, suddenly embroiled amid a frenzy of financial crisis, and looming bail-out interventions.

The jury is still out as to whether or not this crisis will turn out to be “the big one” that will take down the entire house of cards.

Inevitably, the day will come when no form of economic stimulus or monetary policy interventions will be sufficient enough to provide remedy to the decades of sub-standard stewardship rendered by our elected officials.

Until such a day of reckoning arrives, we can not discount the possibility that the present cast of self-perceived masters-of-the-universe and their monopoly stronghold, which is rapidly fracturing, will prevail once again.

The 3 Forces Behind a Market Crash
Back in 1934, Benjamin Graham, the creator of securities analysis, wrote that there are three forces behind a market crash.

1. The manipulation of stocks.
2. The lending of money to buy stocks.
3. Excessive optimism.

Let's assess the level of each factor today.

This article was originally published on Feb. 15, 2007. It has been updated.
Post-mortem: Why did the markets crash?

So, what caused this bloodbath? While the first prognosis of the crisis was that fears of recession in the US brought in the market crash in India, some experts hinted that the markets might be entering a phase of consolidation.

Experts point out that the market movements are based on internal, technical parameters. "The current movements have been caused by margin pressure and heavy selling by the FIIs in the face of bad global clues," market analyst Ashwini Gujaral says.

The global cues were very weak over the weekend. The European markets declined quite heavily on Friday, while the US indices underwent a milder fall. Asian markets were down heavily on Monday morning and there was enough indication that another global sell-off was under way.

SEE:

Black Gold

U.S. Economy Entering Twilight Zone

Tags
asset-backed commercial paper ,, gold
homes, mortgages, housing, bubble, US, economy, oil prices, sub-prime mortgage, Wall Street, crash, recession,
Bernanke, Inflation, Staglation, Stock-Market, US, Federal-Reserve-Chairman, Oil, gold, commodities

STFU 'W'

If I was generous I would say that poor George W. spent the last year as the American economy tanked, viewing the pending crash through rose coloured blinders. As you have read here for the past two years I have predicted the pending crash that brought the market tumbling down last month. It was simple to read in the tea leaves of market excess, or market 'exuberance' as Greenspan called it. But for George W. it was all about denial. The market fundamentals were strong he asserted right up to a few weeks ago. America he had claimed for months is NOT in a recession, denying the obvious. In January oil began its upward spiral, and America was in its third month of downaward spiral. America was in a recession everyone knew it, only George continued to deny it.


Like WMD, which he beleived existed in Iraq, he also believed there was no recsssion, and hence no problem with the market, despite the year of declining housing prices and the ensuing subprime crash.


So it should come as no surprise that the guy who lied to the American people about WMD, could easily lie to himself, and hence the American people, about there being no recession.


Unlike the first U.S. President named George who created the myth of the Honest Presidency, with the allegorical fiction about the cherry tree, this President George has put to bed that myth. While the first George confessed to chooping down the tree this George denies there was a tree.


And so he should not be surprised that over the past three weeks every time he has assured Americans that they need not panic about a market crash, the market responds by crashing further.


It's poetic justice.


Everyone now accepts that W is either a compulsive liar, or a self-deluded fool. What a condemnation the market makes everytime W opens his mouth.


Someone should tell the lame duck to sit down and shut up.



President Bush Speaks on Ailing Economy
Friday Address Marks 10th Time Bush Has Recently Spoken About Volatile Markets
Oct. 10, 2008


President Bush tried to reassure the nation today that the economy is strong enough to weather the current crisis, but by the time Bush stopped speaking nine minutes later, the market had dropped another 107 points.

Following the previous nine times the president specifically addressed the economic crisis, the market ended the day on an upturn on five occasions and closed down the other four.

What the G-7 Should Be Doing To Fix the Financial Crisis

TIME - 10 Oct 2008

Global stock markets were sending an unmistakable signal too: panic. The Dow Jones industrial average finished its worst week ever, off about 22%. On Friday, the market swung wildly, dropping 500 points on three occasions, then vaulting into positive territory before coughing up its gains in the last half-hour of trading to finish the day down 128 at 8,451. The NASDAQ managed a small gain. But European and Asian markets were pummeled again.

DOW PLUNGES 733 POINTS ; Worst Decline Since 1987
Thursday, October 16, 2008
When President Bush speaks, many listen - but apparently investors haven't been reassured by his many speaches about the market meltdown this month.

SEE:

No Austrians In Foxholes

CRASH

Black Gold

The Return Of Hawley—Smoot

What Goes Up...

Wall Street Mantra

Bank Run

U.S. Economy Entering Twilight Zone

Tags

asset-backed commercial paper ,, goldhomes, mortgages, housing, bubble, US, economy, oil prices, sub-prime mortgage, Wall Street, crash, recession,Bernanke, Inflation, Staglation, Stock-Market, US, Federal-Reserve-Chairman, Oil, gold, commodities

VOICE
Is the Coronavirus Crash Worse Than the 2008 Financial Crisis?
The last global economic crisis was a financial heart attack. This one might be a full-body seizure.
BY ADAM TOOZE | MARCH 18, 2020, 12:23 PM
Pedestrians wearing face masks walk toward an electric 
board showing stocks' share price on the Tokyo Stock 
Exchange in Tokyo on March 13.

 PHILIP FONG/AFP VIA GETTY IMAGES

In May 2018, President Donald Trump restructured and downsized the pandemic preparedness unit. Of course, it seems ill-judged in retrospect. But he was not the first president to do so. The National Security Council’s (NSC) global health security unit was set up under Bill Clinton in 1998. Years later, first George W. Bush and then Barack Obama would shut it down, only to reestablish it shortly afterward. The fact is that bureaucracies have never known how to treat low-probability, high-stakes biomedical risks like pandemics. They sit awkwardly within the conventional silos of modern government and models of risk assessment.

If this is true for the NSC, it is even more so for those charged with economic policymaking. Among the tail risks widely discussed in economic policy circles, a deliberate shutdown of national economies on the grounds of a public health emergency has never been seriously considered. Of course, we’ve spoken of “contagion” in financial crises, but we’ve meant it metaphorically—not literally.

In 2008, we saw how the financial uncertainty spreading from the downturn in real estate—by way of subprime to funding markets and from there to the balance sheets of major banks—could threaten an economic heart attack. It was this massive financial shock, piled on top of the losses to households from a downturn in the real estate sector, that caused economic activity to contract. In the worst of times, over the winter of 2008-2009, more than 750,000 job losses were recorded every month—a total of 8.7 million over the course of the recession. Major industrial companies like GM and Chrysler stumbled toward bankruptcy. For the global economy, it unleashed the largest contraction in international trade ever seen. Thanks to massive intervention of both monetary and fiscal policy, it did not become a deep and prolonged recession. After a contraction of 4.2 percent in gross domestic product, a recovery began in the second half of 2009. Unemployment peaked at 10 percent in October 2009.

[Mapping the Coronavirus Outbreak: Get daily updates on the pandemic and learn how it’s affecting countries around the world.]

It is too early to confidently predict the course of the economic downturn facing us due to the coronavirus. But a recession is inevitable. The global manufacturing industry was already shaky in 2019. Now we are deliberately shutting down the world’s major economies for at least several months. Factories are closing, shops, gyms, bars, schools, colleges, and restaurants shuttering. Early indicators suggest job losses in the United States could top 1 million per month between now and June. That would be a sharper downturn than in 2008-2009. For sectors like the airline industry, the impact will be far worse. In the oil industry, the prospect of market contraction has unleashed a ruthless price war among OPEC, Russia, and shale producers. This will stress the heavily indebted energy sector. If price wars spread, we could face a ruinous cycle of debt-deflation that will jeopardize the world’s huge pile of corporate debt, which is twice as large as it was in 2008. International trade will sharply contract.

In the division of labor among different branches of economic policy, addressing the coronavirus recession is a classic task for targeted fiscal policy: tax cuts and government spending. What we need now is less stimulus than a comprehensive national safety net to prevent bankruptcies and long-term financial damage. Once we have survived the epidemic we will need investments in public health infrastructure big and small. Every country clearly needs hugely improved surveillance, modeling, and emergency facilities, as well as substantial reserve capacity. All of this, in due course, will offer excellent opportunities to productively spend money and create high-quality jobs. Unlike in 2008, there will even be sectors that naturally expand. Spending on health care, which already accounts for almost 18 percent of U.S. economic activity, will likely explode. With social distancing, we are, in effect, being mandated to resort to the impersonal delivery and conference systems of the Amazons and Zooms of this world. (If only we already had drones at the ready to deliver billions of care packages.)

But as in 2008, before we can tackle the recession, there is another threat to deal with: the risk of a financial heart attack. A recession is different from a panic. And a financial panic is what we began facing the week of March 8. It is that threat that continues to haunt the markets.

The immediate trigger was the breakdown of oil talks and Saudi Arabia’s announcement of a price war. On top of the worsening coronavirus news from Italy, this shocked markets and induced a contraction in lending and a flight to safety. The demand for cash was insatiable. The reality began to sink in that what started as an external biological shock to the economy might be mutating into an internal collapse in confidence and credit.

A sudden credit crunch exposes those that have too much debt and weak business models and have taken excessive risk. Their distress spreads to the rest by way of business closures, job losses, and fire sales of otherwise good assets. Matters are made even worse if the economic victims have financed their activities with borrowing, such that their losses eventually strike the balance sheets of creditors that were unwise enough to lend to them. Fear of these repercussions contracts credit across the board.

In 2008, the banks were at the center of the storm. Given the consolidation of their balance sheets, it is less likely that America’s big banks will run into difficulty this time. But Europe’s banks never truly recovered from the double shock of 2008 and the eurozone crisis. Italy’s public finances are in precarious balance. On Wall Street, fund managers of all kinds have been booking large losses and are facing huge demand for cash. A hard-pressed oil-producing country might be forced to offload assets from a sovereign wealth fund, thereby depressing prices for otherwise good assets and unleashing a chain reaction.

The most disconcerting sign has been the fact that as stock markets plunged, U.S. sovereign debt fell in price, too. That should not happen. Treasuries should function as safe havens. If their prices fall, it means that enough investors are desperate enough for cash to move even the biggest market.

Toward the end of the week, markets were hoping for goods news from the European Central Bank (ECB). Instead, bank president Christine Lagarde managed to make matters worse by seeming to signal that the ECB had no mandate to support Italy. She was forced to take the remarkable step of apologizing, not to Italy, but to her board. The Fed’s measures, announced at an extraordinary press conference Sunday, were blunt: It dropped interest rates to zero, embarking on a fourth round of quantitative easing. It is broadly the same toolkit it used in 2008.

These are not policies tailor-made for the pandemic. But that is not the point. The point is to not address the impact of the pandemic. As the Fed and ECB have both insisted, that is a task for fiscal policy. Faced with the coronavirus pandemic, the limited but essential role of the central banks is to prevent the credit system from becoming a risk in its own right.

There has not been as much international coordination among the central banks as there eventually was in fighting the 2008 global financial crisis. But explicit coordination may not be necessary. We have spent enough time digesting the experience of the global financial crisis. Everyone knows the playbook, and everyone knows that the Fed must lead. The global financial system is dollar-based. And that is why the most significant step toward cooperation this past weekend was the announcement concerning the standing liquidity swap lines among the major central banks: the U.S. Federal Reserve, the Bank of Japan, the Bank of England, the Bank of Canada, the ECB, and the Swiss National Bank.

The swap lines in their current iteration were first put in place at the end of 2007 to ensure that funding in U.S. dollars was available not only for banks and financial actors based in New York but to the entire global financial system. In 2013, these channels were made permanent among the major central banks. The move this past weekend lengthened the term of the swaps and reduced the interest margin the Fed charges.

We used to worry that Trump and the Republican economic nationalists in his administration would challenge this ultimate expression of global central bank cooperation. After all, the swap lines mean that the Fed provides dollars on demand to its foreign counterparts—not something one would expect the “Make America Great Again” crowd to approve of. But it turns out that when you face a pandemic and you’re arguing over whether it is safe to leave your home, no one cares about nationalist principles.

The Fed’s actions did not stop the selling on financial markets, and it remains to be seen whether the policies will have to be widened. As each new bottleneck is revealed in the credit system, expect more action. First, the Fed increased its support for the repurchase agreement market, where Treasurys and other bonds are lent out for cash. Now, it is supporting the commercial paper market, where big businesses borrow money for three months at a time from investors like money market mutual funds. But the far more basic limitation of central bank action to date concerns the wider world.

The recent swap line measures apply only to the innermost circle of advanced economies. Although it was widened during the global financial crisis, even then only 14 central banks were given access to the Fed’s drip feed of dollars. Amongst Emering Markets only South Korea, Brazil and Mexico were included. The rest were relegated to dependence on the International Monetary Fund. But since 2008, the boundary between the most sophisticated emerging market economies and their advanced economy counterparts has become increasingly blurry.

South Korea has so far weathered the storm in exemplary fashion. Its public health measures along with those of Taiwan appear to be the best in the world. But in a panic, money flows toward the center. So far, we have seen only the beginnings of a flow into U.S. dollar-denominated assets by investors. But several emerging markets are already coming under severe financial pressure. The outflow of foreign funds since the beginning of 2020 has been dramatic. In the past eight weeks since coronavirus fears began spreading, $55 billion has flowed out of emerging markets, a drain twice as large as that seen in 2008 or during the “taper tantrum” of 2013. This will exert severe pressure on countries like Mexico and Brazil, which have large populations, relatively weak public infrastructure, and fragile finances.

The real question concerns China. In 2008, China played a strong hand. It did not suffer a financial run. Its gigantic fiscal and monetary stimulus delivered a giant boost to both its national economy and those who export to it. No swap line was ever seriously contemplated between the Fed and the People’s Bank of China (PBC). Since then, the PBC has established its own swap network. But that supplies renminbi, not dollars. Faced with a crisis that has forced the shutdown of a large part of the Chinese economy and will likely induce a dramatic contraction in global trade, the question is how large the demand might be for dollar funding on the part of China’s globalized businesses. Since 2008, their activities abroad have expanded dramatically and, like other emerging market businesses, they borrow heavily in the American currency. China’s official reserve managers have a large stock of dollars. But like other great reserve stockpiles, they are held not in cash but in U.S. Treasurys.

The last thing the world needs right now, given the uncertainty in Treasury markets, is for Beijing to be forced to liquidate that stockpile. That could offset all of the Fed’s efforts to stabilize the U.S. government funding market. On the other hand, is it not easy to imagine the Fed taking Chinese currency as collateral for a large dollar swap. The Fed would not want to risk the ire of anti-China hawks in Congress.

Faced with a global health emergency and the common interest in maintaining economic stability, one can only hope that the technocratic imagination trumps the evident temptation on both sides to politicize the crisis.

Adam Tooze is a history professor and director of the European Institute at Columbia University. His latest book is Crashed: How a Decade of Financial Crises Changed the World, and he is currently working on a history of the climate crisis. Twitter: @adam_tooze

Coronavirus shock vs. global financial crisis — the worse economic disaster?

The coronavirus outbreak, which has put the global economy under a lockdown, is being compared to the 2008-09 downturn. But in some industries, the virus may have already caused the biggest meltdown in history.


The economic upheaval caused by the COVID-19 outbreak has revived memories of the 2008-09 global financial crisis (GFC): recession chatter, bloodbath on global stock markets, governments and central banks loosening the purse strings.

The pandemic, which has claimed thousands of lives across continents, has virtually brought the world economy to a standstill with millions of people placed under lockdown and global supply chains thrown into disarray due to the virus wreaking maximum havoc in China — the world's factory.

While many are already comparing the current crisis to the 2008-09 recession, most experts do not expect it to be as bleak and are forecasting the global economy to swiftly recover in the second half of the year, provided the outbreak fizzles out by then. Yet, the novel coronavirus has dealt historic blows to the airline industry and oil markets. DW asked experts to compare the economic damage caused by the two crises.

Aviation industry

The aviation industry, suffering from cut-throat competition, price wars and poor financial health, has been clobbered hardest by the pandemic, which has virtually ground air travel to a halt and threatens to bankrupt most airlines. British Airways CEO Alex Cruz described the situation as a "crisis of global proportions like no other we have known."

"Some of us have worked in aviation through the global financial crisis, the SARS outbreak and 9/11. What is happening right now as a result of COVID-19 is more serious than any of these events," he said in a memo to staff.

Several prominent airlines are seeking state relief to help them weather the current turbulence.

"When we see well-capitalized airlines like Lufthansa making statements about the need for state support, then we know things must be bad," Rob Morris, global head of consultancy at Ascend by Cirium, told DW. "Clearly, for every airline globally the objective for 2020 will be to survive through this crisis. I fear there are many who will not be able to achieve that, and we will almost certainly start to see some significant airline failures shortly."

Oil industry

The oil markets are in no better shape. Global oil consumption is expected to witness its biggest fall in history, hurt by a temporary ban on travel, factory shutdowns and other measures to contain the virus. The fall in oil demand could easily outstrip the loss of almost 1 million barrels a day during the 2008-09 recession, Bloomberg reported. Compounding problems is an ongoing price war launched by Saudi Arabia which has pledged to flood an already oversupplied market with cheap crude. Oil prices have fallen by more than 50% this year.

"In 2008-09 we had a demand shock, and inventories built. This [current crisis] looks likely to have a bigger impact, partly because there is a lot of uncertainty still around and partly because it is both a demand and supply story," Philip Jones-Lux, energy market analyst at JBC Energy, told DW. "The industry has been supposedly readying itself for a 'lower for longer' scenario, but the current market and outlook are beyond anything that could be reasonably prepared for and we are likely to see some real pain inflicted if prices remain in the $30-a-barrel range."

Financial sector

The housing market, which was propped up by cheap loans offered to households by banks, was the epicenter of the 2008-09 crisis. The bursting of housing bubbles in the US and in other countries such as the UK, Spain and Ireland brought major global banks, which did not have enough capital to withstand the shock, to their knees. The banks paid a price among other things for bundling subprime mortgages into complex, opaque derivatives to maximize profits. This time, the banks are in a much better position thanks to increased regulation.

"The 2008-09 crisis was far more severe because the global financial system was far more fragile. Banks were not as well-capitalized as they are today particularly in the United States," Sara Johnson, IHS Markit executive director, told DW. "While today there are concerns with rising nonfinancial corporate debt, I'd say the magnitude is not as severe as in 2008-09."

But banks, especially the European ones which have been struggling to boost profits at a time in an ultra-low interest rate environment, are nevertheless feeling the heat. They are bracing for further interest rate cuts and loan defaults. Experts are also flagging a possible sovereign debt default by Italy, which is in a state of lockdown to contain the spread of the virus. European banks are holding more than €446 billions ($497 billions) of sovereign and private Italian debt, according to Bloomberg.

Global economy

The collapse of US lender Lehman Brothers in 2008 fueled the most painful global economic downturn since the Wall Street Crash of 1929. The sustained, severe recession saw global output contract by 1.8% in 2009 compared with an expansion of 4.3% in 2007. Millions of jobs were lost, hurting global consumer spending. While the current crisis could cost the global economy up to $2 trillion this year, according to UN estimates, it's still not expected to push the world into a contraction.

"Our view is that this is a much more temporary shock that is going to have less significant and longstanding negative impacts on the global economy than the global financial crisis," Ben May, director of global macro research at Oxford Economics, told DW. "It's not that as if you don't go out today because you're worried about catching the virus, the money that you didn't spend today will be saved forever, it's more likely to be spent in the future unless something dramatic changes...When you look at past episodes of virus outbreaks or natural disasters, you know typically discretionary spending returns at a later point."

International trade

The coronavirus shock could not have come at a worse time for global trade which has been reeling from trade tensions between the US and China, the world's biggest economies. But the current blow is still not a severe as the one dealt by the crisis 10 years back.

"The global financial crisis was kind of endogenous in the economic system meaning that there was a strong capital stock distortion in some countries and there was a problem of over-indebtedness. These two roots of a crisis are much harder to cure than the situation that we are facing today where we have an interruption of production structures, which in principle are fundamentally sound," Stefan Kooths, head of forecasting at the Kiel Institute for the World Economy, told DW.

"So, even if the coronavirus crisis leads to a deep meltdown in terms of production, the chances of getting out of this recession rather sooner than later are much better than in the global financial crisis."

Excessive deregulation means that the UK is hurtling towards the next crash

Opinion

Prem Sikka 

Yesterday
Left Foot Forward

Deregulation creates opportunities for bankers to take reckless risks with other people’s money, collect bonuses and destabilise economies.

A wise man once said that “history repeats itself, first as tragedy, second as farce”.

Successive UK governments have learnt so little from financial crises and the UK is hurtling towards the next crash. The country has had a banking crisis in every decade since the 1970s. Each crisis drew attention to frauds and predatory practices, but governments remain besotted with light-touch regulation. The finance industry is always bailed out and rarely bears the full cost of its own failures. After the 2007-08 crash, the obedient state provided £1,162bn of cash and guarantees (£133bn cash + £1,029bn of guarantees) to bail out banks. Another £895bn of quantitative easing was handed to capital market speculators. Households are yet to recover from this and the real median wage has hardly grown since 2008.

The tragedy is that deregulation fever is deeply rooted in institutions of government and at the behest of financial elites most of the post-2007/08 banking crash reforms have been dismantled. How long until the next crash and at what cost?

In folklore, regulators are there solely to protect people from predatory practices but that is not the case. The Financial Services and Markets Act 2023 introduced by the Conservative government, with full support from Labour, has returned to the pre-crash position. The Financial Conduct Authority (FCA) has a secondary objective to support growth and competitiveness of the finance industry over the medium to long term. This is a race-to-the bottom. The industry will exert pressure on the regulator by claiming that country X has lower consumer protection and regulatory requirements, and that is making us less competitive.

This dilutes the FCA’s consumer protection duties in a sector riddled with scandals. It is hard to think of any financial product that has not been mis-sold. Car loans are the latest example. Banks gave car dealers secret commissions to entice people into taking loans. The compensation bill could hit £30bn. Rather than helping victims get speedy compensation, the FCA says banks can take up to a year to hear complaints.

Not that the FCA has ever been in a hurry to resolve cases of frauds by banks. Frauds at HBOS date back to 2002 and may exceed £1b. The FCA neither investigated nor prosecuted anyone connected with them. It deemed it to be a matter for Lloyds Bank (Lloyds acquired HBOS in 2008). To disarm critics, in 2017, Lloyds appointed former high court judge Dame Linda Dobbs to investigate and publish a report by 2018. To date, no report has been published and the FCA has not inquired into its disappearance.

Growth of the finance industry is now a major plank of the Labour government’s economic policy. The government wants the FCA to tear up rules and encourage more risk-taking across the City i.e. grow the finance industry for the sake of its own growth. The UK is supposed to be a major global financial hub but industry has been starved of investment. Despite a plethora of subsidies and tax reliefs, amongst industrialised nations the UK languishes near the bottom of the investment in productive assets league tables. In pursuit of short-term gains, the finance industry prefers speculation i.e. gambles on the price of shares, bonds, derivatives and other securities. The price of food and commodities is increasingly determined by speculation by banks, private equity and hedge funds, rather than farmers. They play a major role in creating hunger and poverty.

Deregulation has attracted plenty of predators but has never secured much needed investment in the UK economy, which requires an effective industrial strategy, education, infrastructure skills and focus on the long-term. Significant parts of UK industrial sectors such as rail, water, motor vehicles, energy, steel, shipping, airports, ports, and microchips are all owned from abroad as the finance industry has shown little appetite for long-term investment and risks.

In pursuit of short-term profits private equity has devoured town centres. Its victims include Bernard Matthews, Body Shop, Byron Burger, Casual Dining, Cath Kidson, Comet, Debenhams, Flybe, Four Seasons Health Care, HMV, Maplin, Monarch Airlines, Paperchase, Poundworld, Southern Cross, Thames Water, TM Lewin, Toys R Us and more.

Huge swathes of shadow banking, which includes private equity and hedge funds, remain unregulated. The opaque $63 trillion global industry is bigger than the regulated banking sector and is enmeshed with insurance, pension and banking sectors. Any turmoil will crash the entire economy. The governor of the Bank of England has highlighted dangers but there are no capital adequacy requirements or regular stress tests. The state actually subsidises the sector. For example, excessive debt is the prime investment strategy for private equity. The government grants tax relief on interest payments and thereby reduces the cost of debt and inflates returns to shareholders. The government has no plan to end this subsidy.

Deregulation creates opportunities for bankers to take reckless risks with other people’s money, collect bonuses and destabilise economies. In 2014 to prevent economic shocks a ‘cap’ on bankers’ bonuses was imposed. In October 2023, Conservative government, with full support from Labour, abolished the ‘cap’. Bankers are free to be reckless as they pursue riches and have been encouraged to develop an industry beyond the reach of formal regulations.

Instability is checked by higher capital buffers, but they are also being eroded. The Bank of England has watered down capital requirement rules meant to shock-proof the banking system from another 2007-08 style crash. Banks would have to increase their current capital buffers by “less than 1%” to abide by the Basel 3.1 standards. That is down from previous proposals for a 3.2% rise. Capital adequacy rules for insurers are being rolled back with the claim that this may generate £100bn of private investment in infrastructure. How much will end up in dividends and share buybacks? The more important question is what would happen when financial institutions with low capital requirements have problems? That would destabilise the economy and no doubt the government would once again bail them out with public money.

Deregulation is creating a new Eldorado for bankers. There will be no limits on bonuses and no clawback of gains made with predatory practices. Prosecutions of offending bankers are rare. During the parliamentary passage of the Bank Resolution (Recapitalisation) Bill I urged government to impose a clawback of salary and bonuses of executives facilitating bank crashes. The government refused and the Minister said: “it is a key principle of the resolution regime that natural and legal persons should be made liable under the civil or criminal law in the UK for their responsibility for the failure of the institution. This is delivered by Section 36 of the Financial Services (Banking Reform) Act 2013, which provides for a criminal offence where a senior manager of a bank has taken a decision which caused the failure of a financial institution”.

So, how many bankers have been prosecuted. When asked, the Minister of Justice replied: “The Ministry of Justice Court Proceedings Database has not recorded any prosecutions under section 36 of the Financial Services (Banking Reform) Act 2013 since its introduction”.

Major political parties are obsessed with deregulation and the UK is hurtling towards the next financial crash. Regulators have been emasculated, regulation has been weakened, and enforcement is diluted. The government claims that growth of the finance sector will somehow bring economic prosperity to the UK, something it failed to do in all previous bouts of deregulation. The City has always focused on short-term returns and neglected long-term investment. That will sharpen as bankers will want higher bonuses before moving on to the next job. Equitable distribution of income and wealth to boost purchasing power of the masses, and free education to build a skilled labour force are key requirements for reinvigorating the industrial base but that is off the political agenda.

The next crash won’t just affect banks, pension funds and insurance companies; it will infect all sectors of the economy as private equity and hedge funds binging on debt now own large swathes of the high street and industry.

Prem Sikka is an Emeritus Professor of Accounting at the University of Essex and the University of Sheffield, a Labour member of the House of Lords, and Contributing Editor at Left Foot Forward.

OOPS

Italian ex-premier says French missile downed an airliner in 1980 by accident in bid to kill Gadhafi

FRANCES D'EMILIO
Sat, September 2, 2023 



- An Italian Carabinieri police officer patrols a hangar, in Pratica di Mare, near Rome, Monday Dec. 15, 2003, the reconstructed wreckage of the Itavia DC-9 passenger jetliner which crashed near the tiny Mediterranean island of Ustica in June 27, 1980. A former Italian premier is contending that a French air force missile brought down a passenger jet over the Mediterranean Sea in 1980 and is appealing to France's president to respond. The crash of the Italian domestic airliner killed all 81 persons aboard. What caused the crash is an enduring mystery. 

(AP Photo/Emiliano Grillotti, File)

ROME (AP) — A former Italian premier, in an interview published on Saturday, contended that a French air force missile accidentally brought down a passenger jet over the Mediterranean Sea in 1980 in a failed bid to assassinate Libya's then leader Moammar Gadhafi.

Former two-time Premier Giuliano Amato appealed to French President Emmanuel Macron to either refute or confirm his assertion about the cause of the crash on June 27, 1980, which killed all 81 persons aboard the Italian domestic flight.

In an interview with Rome daily La Repubblica, Amato said he is convinced that France hit the plane while targeting a Libyan military jet.

While acknowledging he has no hard proof, Amato also contended that Italy tipped off Gadhafi, and so the Libyan, who was heading back to Tripoli from a meeting in Yugoslavia, didn't board the Libyan military jet.

What caused the crash is one of modern Italy’s most enduring mysteries. Some say a bomb exploded aboard the Itavia jetliner on a flight from Bologna to Sicily, while others say examination of the wreckage, pulled up from the seafloor years later, indicate it was hit by a missile.

Radar traces indicated a flurry of aircraft activity in that part of the skies when the plane went down.

“The most credible version is that of responsibility of the French air force, in complicity with the Americans and who participated in a war in the skies that evening of June 27," Amato was quoted as saying.

NATO planned to “simulate an exercise, with many planes in action, during which a missile was supposed to be fired” with Gadhafi as the target, Amato said.

In the aftermath of the crash, French, U.S. and NATO officials denied any military activity in the skies that night.

According to Amato, a missile was allegedly fired by a French fighter jet that had taken off from an aircraft carrier, possibly off Corsica's southern coast.

Macron, 45, was a toddler when the Italian passenger jet went down in the sea near the tiny Italian island of Ustica.

"I ask myself why a young president like Macron, while age-wise extraneous to the Ustica tragedy, wouldn't want to remove the shame that weighs on France," Amato told La Repubblica. ”And he can remove it in only two ways — either demonstrating that the this thesis is unfounded or, once the (thesis') foundation is verified, by offering the deepest apologies to Italy and to the families of the victims in the name of his government."

Amato, who is 85, said that in 2000, when he was premier, he wrote to the then presidents of the United States and France, Bill Clinton and Jacques Chirac, respectively, to press them to shed light on what happened. But ultimately, those entreaties yielded “total silence,” Amato said.

When queried by The Associated Press, Macron’s office said Saturday it wouldn't immediately comment on Amato’s remarks.

Italian Premier Giorgia Meloni called on Amato to say if he has concrete elements to back his assertions so that her government could pursue any further investigation.

Amato's words "merit attention,'' Meloni said in a statement issued by her office, while noting that the former premier had specified that his assertions are “fruit of personal deductions.”

Assertions of French involvement aren't new. In a 2008 television interview, former Italian President Francesco Cossiga, who was serving as premier when the crash occurred, blamed it on a French missile whose target had been a Libyan military jet and said he learned that Italy's secret services military branch had tipped off Gadhafi.

Gadhafi was killed in Libya's civil war in 2011.

A few weeks after the crash, the wreckage of a Libyan MiG, with the badly decomposed body of its pilot, was discovered in the remote mountains of southern Calabria.

___

Sylvie Corbet contributed to this report from Paris.

Crashing the economy: Inside Trump's blueprint for more grifting

Thom Hartmann,

 AlterNet
January 30, 2025 

Photo illustration: Christopher Sciacca/Shutterstock

Democrats are warning that Trump’s threats to increase our national debt by as much as $7 trillion (with new tax cuts for billionaires), shift billions of Treasury dollars into crypto, and impose tariffs on imported goods risk creating a financial crises and maybe even a second Republican Great Depression.

After all, tariffs will jack up inflation, crypto is incredibly volatile, and increasing the national debt will pull hundreds of billions out of the treasury in interest payments that could have otherwise been used to help the American people, rebuild our infrastructure, and upgrade our schools. Any of the three could trip off a national economic emergency: all three could be a perfect storm.

Trump, though, seems unconcerned, even though Republican economists are also signaling their alarm. Which raises the question: Why is he so willing to risk an economic crash on his watch with these risky policies?

To the average person, the idea of a recession or even a crash like we saw under Bush in 2008, Reagan in 1981/82, or Hoover in 1929 seems grim. Millions are laid off work, businesses are in crisis as bankruptcies erupt across the nation, and poverty explodes during a time when more than half of American families live paycheck-to-paycheck.

To understand why a billionaire like Trump — and the billionaires who put and keep him in office — might be not just willing but enthusiastic about creating an economic crisis, you first must view it from a rightwing billionaires’ point of view.

— First, a time of economic disaster is a great excuse to gut government programs or reduce taxes with the excuse that federal tax revenues have cratered along with the economy. Both Reagan and George W. Bush used recessions as an excuse to “stimulate the economy” by cutting trillions from the taxes of billionaires and big corporations.

Reagan’s Omnibus Budget Reconciliation Act of 1981 used that year’s severe recession as an excuse to reduce funding for social programs including food stamps, Medicaid, and Aid to Families with Dependent Children (AFDC). George W. Bush used his recession as the justification to try to cut Social Security, although that plan died in the face of widespread public opposition.

— Second, times of economic crisis increase the tolerance for strongman governments. FDR, for example, pushed through a number of then-radical programs using the Republican Great Depression as his excuse. Rightwing politicians were beside themselves, calling him a tyrant, communist, and usurper of constitutional authority, but the majority of Americans at the time were largely with him.

In Europe, Hitler used the Depression to his advantage when he came to power in 1933, demanding — and receiving — massive emergency powers including the ability to rule by decree and outlaw his political opponents.


Trump could similarly use a severe economic crisis to consolidate his power and ram through the authoritarian Project 2025 wish-list as a starting point to take America down the road to an America First form of neofascism.

His billionaire social media backers are already seeding the ground. The US and the UK both embraced neoliberalism (destroy unions, cut taxes on the rich, embrace free trade) around the same time (Thatcher/Reagan) with similar consequences for the middle class of each country.

A new study by Channel 4 in England, reported in The Times, found:

“Most young people are in favour of turning the UK into a dictatorship, according to a ‘deeply worrying’ study, which has revealed an acceptance of authoritarianism and radicalism among Generation Z.
“Fifty-two per cent of Gen Z — people aged between 13 and 27 — said they thought ‘the UK would be a better place if a strong leader was in charge who does not have to bother with parliament and elections.’
“Thirty-three per cent suggested the UK would be better off ‘if the army was in charge.’”

Where did they get these ideas? From social media, it turns out, including the feeds of accused racists, misogynists, and neofascists like “Andrew Tate and Jordan Peterson,” who were “trusted” by 42 percent of British young men.

Fifty-eight percent said they trusted social media posts more than traditional news sources. And 45 percent believe women have gained too many rights, echoing Tate’s argument that, as young British men told Channel 4, “We have gone so far in promoting women’s equality that we are discriminating against men.”

Here in America, the percentage of young men who believe women have acquired too much power has increased from 32% to 45% in just five years, while fully 52% say they trust what they read or see on social media.


— And third, billionaires often make the most money when there’s a crash. They absolutely love market collapses because they are, uniquely, in a position to profit from the same economic downturns that wipe out average working people or those who’ve invested their 401Ks in the market.

This is a story as old as capitalism. During the Republican Great Depression of the 1930s, for example, some of America’s greatest fortunes were made or massively expanded.

My (late) friend Gloria Swanson once told me over dinner in her apartment how her former manager and lover Joe Kennedy, who’d made a pile of money manipulating the stock market in the 1920s, bailed out as the market began its slide in 1929 and even shorted the market, increasing his wealth. But once it had crashed, when everybody was broke, she said, he bought stock with a vengeance.


“Cash is king” was the phrase of the day, and Kennedy was well stocked in cash (he even bought a movie studio). By the end of the Depression, he was one of the richest men in the nation.

J. Paul Getty’s favorite phrase was, “Buy when everyone else is selling, and hold on until everyone else is buying.” It’s something you can only do at scale if you’re fabulously rich to begin with.

The afternoon of the Great Crash — October’s Black Tuesday under Republican President Hoover in 1929 — Getty skipped his parents’ golden wedding anniversary to head to Wall Street where he began buying stocks, particularly in small oil companies that were in trouble.


“It is the opportunity of a lifetime to get oil companies for practically nothing,” Getty later wrote. Out of that, he became one of the richest men in the world.

Flash forward to the modern era.

When Wall Street banks — exploiting Republican-demanded deregulation of banking and investment rules — crashed the American economy in 2007, home prices (and, thus, homeowner equity) collapsed by 21%. Over 10 million Americans lost their homes to banking predators like “Foreclosure King” Steve Mnuchin, and tens of millions of others were underwater.

The stock market plummeted by over 50% in the last year of Bush’s presidency. On October 9, 2007 the Dow was at its all-time peak of 14,164 but by March 5, 2009 it had collapsed to 6,594.


While over 8 million Americans lost their jobs and were wiped out as the Bush Crash started today’s homelessness crises, the top 1 percent (and the Bush and Cheney families) saw it as a buying opportunity.

Working-class people were desperately unloading stocks in their 401Ks at a loss just to pay the bills, as wages plummeted in the face of a collapsing labor market.

But the morbidly rich were doing great.


Between 2009 — the bottom of the Bush Crash — and 2012 when the recovery really began, the top 1 percent of Americans saw their income grow by over 31 percent. Fully 95 percent of all the income increases in the country were seized by the top 1 percent of Americans during that period.

As the economy recovered, rich people who’d used their increased income to buy stocks at the market bottom rode the S&P 500 up by 462 percent to 2020. A billion dollars invested in 2009 became $4.62 billion in just 11 years, a period during which the combined wealth of American billionaires went up by over 80 percent.

Then they did it again 10 years later!


The Trump/Covid Crash of 2020, for example, presented America’s morbidly rich with another brand new and huge opportunity to get richer on top of a crisis brutalizing the rest of America.

Once again the market collapsed, this time under Republican Trump, and working people, now out of work, were selling their stocks at a loss just to pay the mortgage and buy food.

But for the wealthy, it was a gift from God.

March 16, 2020 — just after Trump declared a pandemic and lockdown — the Dow sustained the largest single-day crash in its entire history. For the investor class, Trump, and his billionaire buddies, this was an even better opportunity than the Bush crash of 2007!

Fewer than three months later, on June 4th, we learned that the seven richest people in America had seen their fortunes increase by fully 50 percent.

And with Trump’s massive tax cut for his fellow billionaires, they could keep most all of it: by that time the average American billionaire was paying less than 4 percent in income taxes (a situation that persists to this day).

Just during that one single terrible “crash” year of 2020, the Institute for Policy Studies documents, the world’s 2,365 billionaires saw their wealth increase by a full 54%, as U.S. billionaires saw their net worth surge 62 percent by $1.8 trillion. Average billionaire wealth worldwide increased 27% in that one year alone.

And now it begins anew: Republicans are meeting at Trump’s Doral golf resort in Miami today to plan strategy.

Don’t expect them to argue that it would be a bad thing if his plans provoked an economic crisis: To the contrary, that may well be exactly what they — and their billionaire owners — are hoping for.