Is the U.S. Banking System Corrupt?
Debate Rounds (3)
I have recently watched the new movie The Big Short and I recently learned more about how the 2007 financial crisis was created and what exactly went down during it. Throughout the movie, there is sure evidence that the banks in the U.S. are corrupt (or at least at that time). They would bundle housing mortgages into giant bonds and give it a AAA rating. The thing is, these bonds were actually full of B's, BB's, BBB's and so on (they were full of extremely bad mortgages instead). The idea of this bundling started off as a great idea becuase the bonds were full of AAA mortgages and had an extremely small chance of failing. But, eventually the banks ha become greedy and had started to include lower, poorer rated mortgages into these bonds. They did this to create more money because of the size differences in people with good credit and poor credit. The rating agencies that had the sole job of going through these bonds to rate them were too corrupt because if they did not give the bond a AAA rating, the bond would go on to the competitors. This meant that extremely unstable, poor bonds were being rated as "great" and "reliable". These examples show just how the banking system in America is corrupt and greedy.
Considering Pro has not laid out any particular format that would invalidate this round as opening arguments, I will take this time to make my first arguments, and will use next round to rebut some of Pro's points from Round 1.
(1) The United States banking system is not in fact corrupt.
(1a) Pro has cited the 2007 Great Recession as an example of corruption within the U.S banking system to justify their claims, why this is wrong I shall explain right now.
Following the logic that Pro is asserting, one might deduce that bankers were being criminals who were serving their own selfish interests, and at the cost of the nation's economy, had inflated their paychecks. This is false simply because the bankers were actually bigger victims of the Recession than middle-income Americans -- the majority of them. According to a Forbes article, the primary cause of the Great Recession was actually society prioritizing trying to balance checkbooks and maintain steady financial conditions rather than producing commodities. A direct quote ripped from the article clearly states the following: " First among the former was financialization, or the trend wherein our economy has become increasingly oriented toward managing financial wealth as opposed to the production of commodities."
Now, thanks to liberal biases within the system, and of course the infamous Bush tax cuts, by the time in which the preemptive crash had occurred, the wealthy were spending very insignificant percentages of their total wealth on business investment. "Capitalism needs demand, and the fact that the rich spend a smaller percentage of their income than do the poor is reducing demand. The reason is very simple: the poor have to spend a higher percentage to feed, clothe, and shelter themselves," the article states. Seeing as the wealthy are the job creators who invest their money into assets of society that create employment for the middle-income workers, if they are investing too little into jobs, jobs will start to disappear. Similarly to the period leading up to the Great Depression, if there is too much demand and too little supply, a financial crisis will occur because there is no steady market in play.
Although, I must make one point within what the article is stating: The article states that deregulation killed the economy and paved the way for corruption in U.S banking; this is utterly a fib. From the 1980's on was simply supply-side or even harshly liberal economic policies which have depended on wealthy lobbyists. The free market relies on the successful to spread their success. Once more, a free market is characterized by private ownership with no government regulation of economic affairs. Corporate welfare and other major components of cronyism do not suffice to equal capitalism, and therefore it is illogical to assume that hawks like Bush and Reagan were libertarians.
(1b) Similar to the beginning of the Great Depression, there had simply been too strong a current of money. Banks were outputting way too much money for consumers to invest in, and there was no regular input; therefore, banks were outputting more than inputting and collapsed. With the swelling of banks in the nation, caused by consumers and not by bankers, the debt ceiling raised about two times bigger. Pro does assert the valid concept that housing markets also had contributed to the sinkhole, as stated in an article by Positive Money, "Very little of the trillion pounds that banks created between 2000-2007 went to businesses outside of the financial sector." Once again, those who are wealthy and therefore can invest in assets to society that are beneficial are not doing so, which does not supply public demand.
(2) The Federal Reserve had caused a massive loophole of corruption within the banking system.
(2a) It should come across as no surprise that when one private organization of people is given trust over a nation's economy something is bound to go wrong. Ben Bernanke, Fed Chairman, certainly had stirred the first premature rumble that ultimately resulted in the second-largest economic catastrophe in U.S history. The following quote from a Forbes article explains precisely why his money-printing scandals and financial policies strangled middle-class Americans and sabotaged the U.S economy with inflation, "How did Bernanke create this horrible morass? First, in 2006-2007 he deliberately inverted the Treasury yield curve, even while knowing it would cause a recession and credit-financial crisis. Second, he imposed on the reeling economy a $1.7 trillion flood of "quantitative easing" (QE), euphemistic for the hazardous policy of money-printing."
However, Bernanke also has a frightening ability to bend the economy in his favor whenever he so desires to. Yet another quote from the same Forbes article supports this claim, "The latter concession means that the Fed can easily and deliberately invert the yield curve whenever it chooses, either with short-term rate hikes or passivity in the face of plunging bond yields."
(3) The government putting harsh regulations on economic affairs contributed to the Great Recession.
(3a) The United States had seen harsh regulations and severe tax cuts during many of the presidencies which preceded the G.R, leading one to deduce that regulating the market is toxic to economic prosperity. In an article from American Banker, there is a quote that perfectly summarizes this: "More than 70% of subprime and alternative-A mortgages that led to the crisis were backed by Fannie and Freddie, the Federal Housing Administration and other taxpayer-backed programs. If anyone is looking for a root cause of the financial crisis, this is it." Strong regulations and corporate welfare opened up a perfect opportunity for companies to begin dominating middle-income Americans and to suck up the general public's wealth - piling this issue on top of the failures of the [overwhelmed] bank system, as well as the Fed, and you have one sticky predicament.
Once more, I thank Pro for this opportunity and wish them luck.
Drewby007 forfeited this round.
Moving on to [round one] rebuttals:
1."But, eventually the banks ha become greedy and had started to include lower, poorer rated mortgages into these bonds. "
Because, and I have already addressed this point, the Federal Reserve is operating in favor of corporations and corrupt oligarchs who are driving the middle-class into the ground. The hateful sentiment towards Wall Street that Bernie Sanders and his supporters feel should be directed towards institutions conceived by the liberal government to diminish success and to regulate big banks for no reason than private capital interests, not billionaires who create jobs. For a source of this talking point, examine my previous round arguments/sources.
2. " They did this to create more money because of the size differences in people with good credit and poor credit."
Not necessarily. If the goal of the big banks was to keep outputting money into the society, then a financial crisis would sent shockwaves through the market. Inflation would hit the economy if money kept being printed because it would be downgraded and devalued. Realistically, it is not the banks themselves, but 1) regulations which stagnate wages and allow advantages of the wealthy and 2) corporate welfare and bailouts which enable corporate interests to use the government as a piggy bank.
Thank you, Pro. I wish you luck.
Drewby007 forfeited this round.
Libertarian_Jacquelyn forfeited this round.
1 votes has been placed for this debate.
Vote Placed by SirMaximus 10 months ago
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Reasons for voting decision: Con forfeited only 1 round, but Pro forfeited 2 rounds. Therefore, Con wins for conduct.
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