Alan Greenspan was the chairman of the Federal Reserve. He was America’s top financial regulator. There was a tiny problem. He did not believe in regulating finance. He was a libertarian.  

Ignoring warnings, he let Wall Street turn global finance into a “casino” (The Economist) playing with “instruments of mass financial destruction” (Warren Buffett). The collapse of Lehman Brothers on Sept. 15, 2008, set off mass panic globally and caused the Great Crash. Greenspan then declared himself to be in “a state of shocked disbelief,” reminding everyone of Captain Renault’s classic line in Casablanca: “I’m shocked, shocked, to find there’s gambling going on here!” 

Luckily, someone, somewhere, had a brain. This was Gordon Brown, Britain’s Prime Minister and former chancellor of the Exchequer. He understood global finance. Acting with finance ministers and central bankers globally, he prodded the Bush administration into joining the rescue of the rapidly collapsing global economy. 

Hank Paulson, secretary of the Treasury, rushed the $700 billion Troubled Asset Relief Program (TARP) through Congress to bail out the financial industry on Oct. 3, 2008. This stopped the sheer panic and the major hemorrhaging. Fine but, purely as a silly question, who came out better from TARP: Wall Street or America’s taxpayers?  

Robert Scheer’s 2010 book The Great American Stickup gave an excellent explanation — TARP’s rescue of the insurance giant AIG was the largest private company bailout in American history; it also covered $303 trillion of derivatives losses for the banks. How so? Simple: Washington does not regulate Wall Street. Wall Street regulates Washington.  

Scheer describes America’s bailout of AIG as the greatest swindle in world history. $68 billion of taxpayers’ money vanished into the worthless AIG. Incredibly, some went to its wiped-out shareholders, entitled to nothing! The rest magically came out at Goldman Sachs and similar outfits. Goldman’s alumni in the Bush administration (including Paulson) fixed that one nicely.  

Compare this with Sweden. It nationalized its problem banks, nursed them back to health, and sold them for a profit. Taxpayers took the risk; taxpayers got the benefit (“democratic socialism”). But America has capitalism for the plebs and socialism for the wealthy. 

America’s economic collapse continued until President Obama took office in 2009. Congress immediately passed his $825 billion economic stimulus package despite ferocious opposition from the Republican wrecking crew. Fortunately, two Republican moderates in the Senate allowed him half the amount actually needed. It was just enough to revive the economy. The recovery it produced was slow because the economy had been, was, and still is, ravaged by Reaganomics — scarcely Obama’s fault. 

The Economist magazine trashed America’s financial system as “rotten to the core.” The bankers had not abolished financial risk. They had merely swept it under the carpet. Greenspan let them. When the carpet was lifted the creepy-crawlies ran out. But nobody gave the order, “Round up the usual suspects!”  

Republicans had fixed that one nicely. In the 1990s, they wanted major changes to America’s financial system. The Republican-friendly President Bill Clinton went along (“triangulation”). There was little debate. Sen. Phil Gramm, R-Texas, simply stuck hundreds of “business-friendly” pages into a “must-pass” bill in December 2000. It included “get out of jail” cards making prosecution of the bankers virtually impossible.

Brooksley Born, leading the Commodity Futures Trading Commission, strenuously opposed these changes. Like another Democrat, Warren Buffett, she predicted economic collapse on a catastrophic scale. Both these clear thinkers were ignored. She resigned when Congress prohibited her agency from regulating derivatives. Born later received the John F. Kennedy Profiles in Courage Award for having a spine and a brain.

Gramm became a director of the Swiss bank UBS. He loaded the thing up on derivatives. Naturally, it crashed. Like Paulson and Greenspan, Gramm is super-quiet these days. 

After causing the Great Crash, Republicans deflected blame with flat-out lies. They claimed that the Democrats’ Community Reinvestment Act forced banks to make unsafe loans to minorities. But the amount of such loans made by “banks” was minuscule. The Act applied only to “regulated institutions” (real banks), not to the cowboy outfits (“shadow banks” and bank subsidiaries) responsible for most of the funding (e.g., Ameriquest, Countrywide). And they claimed that Obama was responsible for TARP, an obvious whopper. (He became president later.)

The Great Crash cost America around $15 trillion in lost wealth, threw millions out of work, left thousands of empty foreclosed homes, increased national debt, and made Americans look like fools. And swindlers: The British, French, Germans and Swiss were bilked out of billions. 

The Financial Crisis Inquiry Commission looked into the causes of the Great Crash. So everyone has read it, right? There will be no more crashes, right? Dream on. Republicans have complete control of D.C. They only care about making their rich donors richer, not safeguarding the economy. Unlike Casablanca, this movie will not have a happy ending.