Ten years since the 2008 bank bailout
3 October 2018
Ten years ago today, the US Congress and the Bush administration initiated the largest bank bailout in human history.
With the passage of the Emergency Economic Stabilization Act of 2008, which created the Troubled Asset Relief Program (TARP), the US Treasury was authorized to spend some $700 billion to purchase “troubled assets” from leading Wall Street banks. This was to be merely a down payment, with total support from the US government, largely overseen by the Obama administration, figuring in the trillions.
The passage of TARP was the initial response of the American ruling class to the crisis brought on by the collapse of the US housing bubble, itself the outcome of decades of increasing speculation and financialization. Major banks and financial institutions had made billions through the fraudulent marketing and packaging of subprime mortgages. When the manic and lucrative party came to an end, they held trillions of dollars of essentially worthless (“troubled”) assets.
In public statements, leading figures of the American ruling elite issued dire warnings about the consequences if the government did not immediately intervene to save the banks. All the resources of society had to be pressed into bailing out the financial system. No expense could be spared, and no questions asked.
While the 2008 crisis was rooted in fundamental contradictions of American and world capitalism, deliberate decisions were made to create the best conditions for a massive transfer of wealth to the ruling elite.
The immediate cause of the financial meltdown in the fall of 2008 was the collapse of investment bank Lehman Brothers, which sent shockwaves throughout the global economy. In his memoir, Timothy Geithner, then president of…