Tuesday, November 8, 2011

"The Financial System Is Rigged in Favor of the Rich"

Economist Mark Thoma at Fiscal Times:
If the Federal Reserve had thought more about Main Street when it was bailing out the financial system, there might not be an Occupy Wall Street movement throughout the country today.

The belief that the economic system is rigged in favor of the rich and powerful is an important factor driving OWS. This belief is based, in part, on the way in which the financial bailoutwas handled by monetary authorities. Policymakers insulated banks from losses using the argument that protecting Wall Street would also prevent large losses on Main Street. But the bailout alone wasn’t enough to prevent big problems on Main Street, and it came to be viewed as largely a giveaway to the wealthy interests controlling financial institutions.

It didn’t have to be that way. Instead of bailing out banks directly, we could have given money to homeowners to help them pay their mortgages. The money could have been earmarked for mortgage payments so that it still ended up in the hands of banks, but by allowing the help to pass through households first, the distribution of the benefits from the bailout would be much different: Both households and banks would have realized gains, and this would have been much more politically acceptable.
Read the rest HERE.