Much of the world is still reeling from the effects of ‘The Great Recession’ that first hit amid the banking and financial crisis beginning in 2008.
In this discussion with best-selling author and speaker Nomi Prins, she discusses the 2008 bailout that followed the crisis and exposes how private banks emerged stronger, while most ordinary citizens saw their personal economic situation decline.
Speaking about the Obama administration’s huge bailout of the banking sector after the crisis, Prins, who penned the book ‘All the Presidents’ Bankers: The Hidden Alliances that Drive American Power,’ says she doesn’t thing the “subsidization” of the banking sector in 2008-2009 should have been carried out as it was.
“What occurred was a tremendous amount of different perks and aid that were given to the private banks, in particular the big six banks,” she said.
She said this list of institutions – comprising JP Morgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, Morgan Stanley – all came out of the crisis and bailout bigger and more powerful. This contrasts to most of the U.S. population, which has either stayed the same or become weaker.
Prins points out that much of the talk at the time about the banking bailout being necessary to save the world’s whole economic system amounted to scare tactics by high government officials trying to frighten U.S. citizens into accepting the idea.
“In total, there was something like 23 trillion dollars,” she said about the astronomical money transferred to the troubled banks. “Loans given to banks at zero interest, in return for some of the bad assets, some of the assets that were the heart of the crisis.”
As a result of this, the banks were able to replenish themselves and regain solvency for the bets they made with the rest of the financial industry and with each other, without having to do anything for the individual borrowers that actually had mortgages with these institutions.
In addition to the advantages afforded the banks, there were no government requirements for them to give anything back to the borrowers who were most affected by the crisis.
Prins is also asked about the national debt and to whom the U.S. government is actually in debt to. “It’s this triangle of the treasury creating debt, which then looks like it’s all on our backs, because it is public debt, but it goes through a private banking system, for which private banks make money,” she responded.
“And then private banks take some of it and put it on the books of the Federal Reserve, with that money doing nothing but sitting on the books of the Federal Reserve – and earning a quarter percent interest from the Federal Reserve.”
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