Sheldon Richman writes that it takes a government and its central bank, the Federal Reserve System, to do the following:
- Create barriers to entry for the purpose of sheltering existing banks from competition and radical innovation, then regulate for the benefit of the privileged industry;
- Issue artificially cheap, economy-distorting credit in order to, among other things, give banks incentives to make shaky but profitable mortgage loans (and also to grease the war machine through deficit spending);
- Make it lucrative for banks – and their bonus-collecting executives — to bundle thousands of shaky mortgages into securities and other derivatives with the knowledge that government-sponsored enterprises Fannie Mae and Freddie Mac and other companies, all subject to powerful congressmen looking for campaign contributions, would buy them after a government-licensed rating cartel scores them AAA;
- Inflate an unsustainable housing bubble by the foregoing and other methods, enticing people to foolishly overinvest in real estate.
- Work closely with lending companies to establish a variety of programs designed to lure people with few resources or bad credit into buying houses they can’t afford;
- Attract workers to the home-construction bubble, setting them up for long-term unemployment when the bubble inevitably burst;
- Implicitly guarantee big financial companies and/or their creditors that if they get into trouble they would be rescued;
- Compel the taxpayers to bail out those companies and/or creditors when the roof finally fell in.
He wrote that no single bank or group of banks could do these things on its own in a free market. It takes a government-Wall Street partnership, the corporate state or the fascist state, to create such misery and exploitation.