SEATTLE — The ongoing economic crisis that stemmed from risky mortgages presents not only challenges, but also opportunities to reinvent America, four speakers said at a panel discussion in Seattle.
The government continues to spend billions of dollars to bail out fragile financial institutions, hoping that they will resume lending money to businesses and people, said Peter Dorman, professor of economics at The Evergreen State College in Olympia. But the problem is that nobody knows how much more money it will take to achieve that.
“Just stop it. No bailouts,” Dorman said.
Dorman was among the four panelists at the event at Town Hall Seattle on Wednesday night. About 230 people attended the event organized by nonprofit groups such as the Institute for Policy Studies, Jobs with Justice, National Community Reinvestment Coalition and U.S. Action. It’s one of the 60 similar events happening in 29 states this month, said Alan Preston, Northwest organizer for Working Group on Extreme Inequality.
“The purpose is to educate people about the real story of the root causes of the economic crisis and what the bailout means,” Preston said.
Three major factors have triggered the financial crisis, Dorman said. America’s huge trade deficit required massive borrowing by the U.S. from foreign countries. The unequal income distribution resulted in many Americans over-reliance on credit cards to make ends meet. And the deregulation of the financial industry prompted aggressive and irresponsible lending practices, especially in mortgages.
Once the housing boom ended, banks started failing, Dorman said. And the bad economy continues to hurt manufacturing and other industries.
“Nobody can tell us where the bottom is if we can ever get out of this,” he said.
Dorman suggested creating a public banking system — instead of bailing out private financial institutions — to solve the credit crunch.
Three other panelists were Dian Ferguson, former executive director of Operational Emergency Center; Tony Lee, advocacy director for Solid Ground; and Kristen Sheeran, executive director for Economics for Equity and the Environment: E3 Network.
Lee said the story of subprime mortgages is summarized in two words: greed and fraud. Financial firms and mortgage brokers made money issuing risky mortgages and selling them as securities to other institutions. At the height of the housing bubble, they didn’t even verify a borrower’s income.
“This could’ve kept going on as long as the housing market kept rising,” Lee said. “Once the home prices stopped appreciating, they couldn’t refinance their mortgages.”
The economic downturn plagued by the housing crisis hurts not only homeowners, but also nonprofit groups that aim to help those in need. Operational Emergency Center shut down this summer because it couldn’t refinance a loan for its building in Seattle, Ferguson said.
The government is playing a large role improving the economic crisis, Ferguson said. People need to pay attention to how officials act.
“We have to do a much better job holding people accountable,” she said.
If any good comes out of the financial crisis, it gives the nation opportunity to invest its resources in critical sectors: health care, education and energy infrastructure, Sheeran said. Building renewable energy systems should improve the economy as well as addressing the climate crisis.
“We have enormous challenges ahead of us,” she said.
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