Pat Garofalo is economic policy editor for ThinkProgress.org at the Center for American Progress Action Fund.
The financial crisis that nearly torpedoed the global economy began in earnest three years ago this week with the September 15 bankruptcy of the investment house Lehman Brothers. One day later, mega-insurer American International Group Inc. was bailed out by the U.S. government to the tune of $85 billion.
Lehman's bankruptcy was the largest in American history, and the credit panic that followed it set the stage for the reviled (but vital) programs that became symbols of the nation's financial meltdown: the $700 billion Troubled Asset Relief Program and the myriad lending programs put in place by the Federal Reserve to save the biggest financial institutions on Wall Street (and beyond) from the consequences of their own bad behavior.
Bailing out Wall Street back then was a necessary evil, as AIG's bailout revealed in dramatic fashion. It gave the public its first look at companies that had become "too big to fail," financial institutions that were too entangled with each other to be allowed to collapse lest they drag the rest of the global financial system and global economy down with them.
In the Great Recession that followed, 14 million people lost their jobs, and $20 trillion in wealth was destroyed. Today, one in three homeowners find themselves underwater due to the bursting of the housing bubble, owing more on their mortgage than their home is worth.
So Main Street is still hurting. But the Wall Street banks that created the U.S. housing bubble to supercharge their profits are largely healed, making record profits and handing out escalating bonuses. And the fixes to safeguard our financial system following the September 2008 crash are not yet in place.
In fact, many are being actively blocked by congressional Republicans who seem more interested in doing the bidding of Wall Street's behemoths than in protecting the financial system from experiencing another meltdown.
Last July, President Obama signed into law the Wall Street Reform and Consumer Protection Act, the most thorough rewriting of our nation's financial regulations since the New Deal. While not going so far as to break up the biggest banks or force them to wall off their risky trading desks, the law still goes a long way toward building a more secure financial system that works for consumers, not just for the top executives at the biggest banks and their shareholders.
Problem is, House Republicans are blocking the funding necessary to implement the new law. The Commodity Futures Trading Commission, for instance, faces the gargantuan task of overseeing the market for derivatives—the credit instruments that the Financial Crisis Inquiry Commission said were "at the heart" of the 2008 crisis—but Republicans are trying to cut its budget. Senate Minority Leader Mitch McConnell of Kentucky even argues that "the less we fund those agencies, the better America will be."
Senate Republicans also refuse to confirm any director for the Consumer Financial Protection Bureau, which was created by the new Wall Street reform law, until changes are made to the agency's structure that would render it a second-class regulator, subservient to the federal bank regulators that refused to rein in Wall Street excess before the 2008 crisis. Not to be outdone, several of the GOP's presidential candidates, including former Govs. Mitt Romney and Jon Huntsman (the supposed moderates in the field) are calling for the wholesale repeal of the new law.