Journalist calls for “a jailout, not a bailout”

Credit-default swaps. Derivatives. Collateralized debt obligations. Mortgage-backed securities. How many people on the street do you think could accurately define these terms? These financial “innovations” play a critical part in the story of the financial crisis, but average Joes—even above-average Joes—struggle to understand the role these instruments played. At our screening and discussion last week of “Plunder: The Crime of our Time,” journalist Danny Schechter proposed a framework for discussing the financial crisis that relies less on financial wonkery and more on a moral narrative.

In “Plunder,” Schechter makes the case that criminal acts of fraud and deception lay at the root of the financial crisis. The film argues that the scope of the fraud was huge, ranging from dishonest subprime lenders tricking unsophisticated borrowers into unaffordable loans, to the packaging of these risky loans into securities labeled risk-free, to the unknown parties who made millions betting against the U.S. housing market. “We need a jailout, not a bailout,” Schechter concludes. He pointed out that there is precedent for a widespread “jailout”: after the savings and loan crisis of the 1980s, more than 1,500 bankers went to jail.

Schechter says that the crime narrative not only presents a compelling argument, but helps individuals unacquainted with the ins and outs of exotic finance understand the extent of wrongdoing. That understanding is critical to efforts to mobilize around financial issues. “[The crime narrative] shifts the discussion from right and left to right and wrong,” Schechter argues.

During the panel discussion, National Community Reinvestment Coalition President and CEO John Taylor agreed that this framework could contribute to mobilization efforts. Taylor lamented the lack of political will to enact far-reaching reforms that would help working families and hold banks accountable. Taylor criticized House and Senate leaders for allowing bills to modernize the Community Reinvestment Act and to allow judges to modify mortgages on primary residences in bankruptcy to lose steam.

The Coalition for Community Banking’s Terry Finnegan discussed the neighborhood-level impact of the financial crisis. The financial crisis that started on Wall Street spread to community banks, causing many to fail. The Coalition for Community Banking is a group of activists, local businesses, non-profits, religious groups, and individuals that formed after the seizure of Park National Bank by the FDIC, who sold the bank to US Bank. The Coalition for Community Banking is working to preserve community banks as an important source of credit, particularly to underserved communities like the West Side of Chicago. Finnegan, a former official with Park National, said that the need for investment is more real than ever as home values plummet in communities formerly served by Park National and potential homeowners face more and more barriers to credit.

Finnegan’s concerns about access to credit echoed Illinois Attorney General Lisa Madigan’s opening remarks, in which she criticized predatory lenders for the damage they inflicted on Illinois families. Madigan discussed her office’s efforts to hold unscrupulous lenders accountable for draining millions of dollars from Illinoisans who can least afford it, including a joint investigation of the robosigning scandal and lawsuits against predatory lenders.

While the tone of the panel was gloomy—perhaps appropriately, considering the trillions lost in the financial crisis—attendees came away with ideas for taking action. “We can't assume knowledge on the part of our family and friends,” Schechter reminded the audience. “We must become educators and organizers.” He suggested using movies like “Plunder” and “Inside Job” as tools for educating and organizing. Organizations and individuals can become involved with Woodstock and NCRC to stay up-to-date on the latest policy news and learn about advocacy opportunities. Please click here to get more information on “Plunder” and where you can watch it.

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