The 2009 financial crisis taught us hard lessons. Have Democrats

On Oct 28, 2021

A first-term Democratic president with a majority in Congress and an uncompromising Republican opposition. A country disillusioned by a previous administration’s corruption and mismanagement. A working class traumatized by an economic downturn. An establishment calling not for aggressiveness and boldness, but for half measures and compromise.

If this sounds familiar, it is not only because it describes this current moment, but because it is the experience we lived through 12 years ago – a political meltdown that destroyed many Americans’ remaining faith in their government, and ultimately birthed Donald Trump’s presidency.

That meltdown crushed faith in hope and change, and led to Maga and mayhem. And if Democrats continue making the same choices again, we should expect the same results – or worse.

2009 was not 2021, but history tends to rhyme. Back then, the contagion wasn’t a virus, it was a financial panic brought on by the collapse of what had been the American economy’s most stable pillar: the mortgage. But the homes were built atop a precarious foundation. After a spate of bank deregulation, Wall Street giants had transformed themselves into the newest peddlers of the old swampland-in-Florida schemes, enticing borrowers and pension funds to bet life savings on unsustainable housing prices and debt.

When enough homeowners couldn’t make their payments and home prices cratered, millions faced foreclosure, retirement systems faced huge losses on mortgage-related investments, 401k plans faced stock market declines, and banks faced the prospect of insolvency.

Amid this financial pandemic, though, there was a glimmer of something better – Barack Obama, who had campaigned on an inspiring promise to “bring a new era of responsibility and accountability to Wall Street and to Washington”.

That FDR-esque rhetoric resulted in a 2008 election landslide, a huge Democratic congressional majority, and high hopes that a new administration would fight the Great Recession with the same kind of robust New Deal that Franklin Roosevelt deployed to successfully combat the Great Depression.

But that didn’t happen.

Obama had helped the Bush administration forge the Troubled Asset Relief Program (Tarp), whose name seemed to promise assistance for homeowners, but which instead provided most of its benefits to a handful of financial institutions. When he took office, Obama could have changed how Tarp money was being spent, but he and his administration kept funneling the cash to Wall Street. The relative pittance that trickled out to aid borrowers mostly stretched out foreclosures to “foam the runway” for financial institutions, as Obama’s treasury secretary Tim Geithner reportedly said.

Soon after, the Wall Street-bankrolled Obama administration scaled back its economic stimulus plan, backed off its promise to reform bankruptcy laws, refused to…