The self-described â€śGeniuses of Wall Streetâ€ť are being stupid. Again.
In 2007, their stupid schemes and frauds crashed our economy, destroying middle-class jobs, wealth, and opportunities. Far from being punished, however, the scofflaws were bailed out by their Washington enablers - so the moral lesson they learned was clear: Stupid pays! Go Stupid!
Sure enough, here they come again.
Rather than investing Americaâ€™s capital in real businesses to generate grassroots jobs and shared prosperity, Wall Street is siphoning billions of investment dollars into speculative nonsense - such as bundles of high-risk, subprime auto loans.
It works like this: Car dealers, eager to goose up sales, hawk new vehicles to lower-income people, offering quick loan approval, even to those with poor credit ratings. Banks - eager to hook more people on monthly car payments - okay these subprime car loans without verifying the buyerâ€™s ability to pay.
Then, a Wall Street bankâ€™s investment house buys up thousands of these iffy individual loans, bundles them into multimillion-dollar â€śdebt securities,â€ť and sells them to wealthy global speculators.
Last year alone, Bloomberg reports, banks sold $26 billion worth of these explosive bundles of car loans.
This is a gaseous repeat of Wall Streetâ€™s subprime mortgage bubble that burst a decade ago. The scam generates easy money at the start for speculators and banksters. But as more and more buyers are unable to make their car payments, defaults build up - and the whole financial bubble pops.
Wasting Americaâ€™s much-needed investment capital on a scheme that intentionally puts people in cars they canâ€™t afford with loans they canâ€™t repay isnâ€™t only stupid, but immoral - and itâ€™s killing our real economy. Why are we letting elite Wall Street loan sharks do this to us?
OtherWords columnist Jim Hightower is a radio commentator, writer, and public speaker. Heâ€™s also the editor of the populist newsletter, The Hightower Lowdown. Distributed by OtherWords.org.