One Year Later: The Lessons of a Failed Economic Philosophy

We are no more insulated from a financial crisis today than we were one year ago. Congress has not changed a single rule, habit or practice to stop this economic calamity from happening again.
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Exactly one year ago today, the bankruptcy of Lehman Brothers capped a series of calamitous economic events that sent financial shockwaves throughout the world's economies. From the bailouts of AIG, Fannie Mae and Freddie Mac; to the collapse of Lehman; to the sale of Merrill Lynch, the fall of 2008 brought to American markets a financial tempest that overturned the lives of hundreds of thousands of Americans and left millions of others anxious about the long-term stability of their investments and their livelihood.

The causes of the crises have been reported: years of lax attention given to massive leveraging of debt, laissez faire government regulations and the seemingly willful ignorance of Wall Street's risk assessment firms directly led to that precipitous moment.

Unfortunately, it is also clear that we are no more insulated from such a similar crisis today than we were one year ago. Congress has not changed a single rule, habit or practice to stop this economic calamity from happening again. Meanwhile, media outlets have revealed that Wall Street refuses to self-correct its reckless behavior: firms are packaging life insurance policies together into complex securities to be sold off to investors and lavish corporate bonuses are making a comeback.

By its inaction, Congress is taking a dangerous risk with the livelihood of millions and with the credit of our own government. We must act with foresight, and we must act now.

Since the collapse of Lehman, the phrase "too big too fail" has become commonplace in our political lexicon. Our banking and credit system stands on just a handful of institutional pillars. Bank of America, JP Morgan Chase and Wells Fargo combined have more than one third of all deposits in the United States. Include Citibank and Merrill Lynch in this group and these five corporations represent almost two out of every three credit card issuers in the country. Imagine if one of these institutions were to fail today? What will have changed?

We cannot allow this systemic risk to our economy to continue. We cannot act in a manner that suggests that massive government intervention of the type we have seen in the last year is or should be the norm. We must take preventative action that will negate the need for future burdens on taxpayers. As such, we cannot and should not delay passage of necessary regulations, allow banks to continue to operate at their current size and continue to neglect the small and medium size institutions that are a vital part of our communities.

Yesterday, the president said that we must "close the loopholes that were at the heart of the crisis." He called for the creation of a regulatory oversight council to work parallel to the Federal Reserve, stronger capital and liquidity requirements for financial firms, and greater regulation of the type of risky behavior that led to last year's crisis. Congress should not delay holding hearings on any of these important measures and sending something to the President for his signature.

In my opinion, however, part of this debate must also be an honest assessment and rejection of the irresponsible economic philosophy that exacerbated our march to the brink.

Over the last eight years, passing tax cuts for the wealthiest, embracing policies that encouraged corporations to ship jobs overseas, and promoting trade policies that hurt American workers created an economic foundation built on a pile of sand. Middle class America was on the receiving end of these disastrous policies, and as a result, they took on more and more debt. Families paid for exploding health care costs, tuition bills and basic household items with credit cards and home equity loans, creating a tragic cycle of insecurity. Now, as people who were forced to live on credit rather than save for a rainy day lose their jobs, they have nothing else to fall back on.

Last week, the Census Bureau's annual report on income, poverty and health insurance, revealed that in the last decade, media household income has actually fallen. The Census Bureau has been monitoring household income for four decades. Not only have we experienced the first decade where median income has failed to rise, but it appears that this is the first decade on record where household income has declined.

Voters must not forget that the blame falls not just on the corporations that chose profits over sound policy, but that blame also falls on Congress who deliberately ignored the plight of working families over the last eight years.

Throughout his career in Congress, my likely Republican opponent was one of George W. Bush's biggest cheerleaders in Congress. Mark Kirk voted to support every single tax cut for the wealthiest 1%, every single budget that borrowed billions of dollars, and every single corporate subsidy for special interests that were putting profits over people.

Just as Wall Street has learned little from its prior bad acts, so too has Congressman Kirk been oblivious to the errors of his ways. Indeed, even recently, when President Obama proposed cutting taxes for the middle class, spending money on vital projects to create and save jobs, increasing unemployment benefits for those who lost their jobs, and rebuilding crumbling schools to invest in our children's future, Congressman Kirk voted no.

Last Friday, new Census figures drafted the definitive record on Bush's presidency and Congressman Kirk's economic philosophy. Those figures show that over the eight years that Congressman Kirk helped to implement George W. Bush's economic policies, median household income fell 4.2 percent, the number of children living in poverty increased by almost three million, and the number of uninsured increased by nearly eight million.

As we move forward in enacting long-overdue regulatory reforms that will increase accountability on Wall Street, we must also hold those in Congress accountable for their errors as well and embrace new, pragmatic, and progressive economic philosophies that will protect our economic system for generations.

In the coming weeks I will lay out an economic plan that will focus on creating jobs and investing in our future.

An equally important component of this plan will be to take the lessons learned from the past year and put into place the rules and regulations that will ensure the foundation of the 21st century economy is solid, protects middle class families and departs from the havoc wrought by the failed economic philosophy of the past.

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