Sheila Bair was chair of the Federal Deposit Insurance Corporation from 2006-2011, a period in which the U.S. faced the worst financial crisis since the Great Depression. She is author of several books, including her latest, "Bullies of Wall Street."
“Reap what you sow.” Many of us remember hearing that in church as we were growing up, but in fact, it is a universal teaching in all religions. Innately, we know it’s only right for people to enjoy the benefits that flow from their own ideas and hard work. It’s equally important for people to accept the consequences when they fail. If a student goes to class and studies hard, he should get a good grade. If he slacks off, he shouldn’t. Not only is this principle morally right, it also provides practical benefits to society. Knowing that we will benefit (or suffer) from the results of our own behavior encourages us all to do our best.
During the years leading up to the 2008 financial crisis, a lot of people who worked in financial services did their worst, not their best. They behaved irresponsibly, but by claiming financial “engineering,” they thought they could escape the consequences of their own actions. They got greedy. They wanted to make a lot of money, they wanted to make it right away, and they didn’t care about the people they hurt in the process. Unfortunately, most of those responsible for this crisis did not suffer from their actions. Most of them were bailed out by the taxpayers. They did not “reap what they sowed.” Millions of innocent families suffered the damage instead.
This lack of accountability has created bad incentives for financial risk-takers. It also sent a horrible message to the nation’s young people. Do you get ahead by working hard and playing by the rules? Or do you behave irresponsibly and count on powerful friends and government connections to bail you out when you get into trouble? Years after the crisis, a lot of people on Wall Street continue to glorify the bailouts as “saving the system” while attacking regulators who are trying to reform it. Do an Internet search of books about the “financial crisis” and you will find most written about all the big important people in government and on Wall Street who made the decisions that were responsible for the crisis and the ensuing bailouts. But there are very few books that put a human face on the millions of vulnerable families who suffered from their actions.
Just as importantly, few books have dealt with the poisonous impact of the bailouts on people’s attitude toward our political system. The general population continues to be very angry about the bailouts. But far worse than their anger is the cynicism and bitterness which has set in about government being rigged in favor of powerful Wall Street interests. Washington has done little, if anything, to dispel that view. Financial reforms are at best, half-finished, and the politicians are already rolling back some of the new rules.
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We are still at risk for another crisis, but what scares me even more is the corrosive impact of the bailouts on our society. The greatness of this nation has always been based on equality of economic opportunity and individual responsibility -- the chance to have your shot and reap what you sow. But we’re losing faith in that basic idea.
That’s a sad legacy for my baby boomer generation and one I would like to see changed. So I wrote a book for young people about the financial crisis, in the hope that it would inspire future generations to do better than we did. And what better way to inspire than through the power of narrative -- by telling stories that illustrate how young people and their loved ones were so damaged by this crisis? By reading such tales - all fictional tales based on interviews and newspaper accounts -- I hope young readers will be moved by compassion. I hope they will read them with their parents and teachers, discuss them with their friends, and carry memories of them into adulthood as they decide what kind of people they want to be.
It was painful to interview families as part of my research for this book. Even though many years had passed since the crisis, they still broke down in tears as they retold their personal stories. Most were in the process of repairing their lives, but some were permanently broken by divorce, illness, and economic devastation. As I amalgamated their experiences into fictional accounts for this book, I decided to end them happily. As an author, I wanted to give them happiness even if I lacked the power to do so in real life. I also wanted to shield my young readers from too much sadness and despair. Because as bad as the crisis was, I want them to finish my book with a sense of hope and optimism.
“What doesn’t kill you makes you stronger.” Young readers may be familiar with that saying from a Kelly Clarkson song, though the concept originated with the famous 19th Century German philosopher, Friedrich Nietzsche. The 2008 financial crisis didn’t kill us, but it is yet to be seen whether the experience will make us stronger or spell our downfall.
There are two very different lessons that can be learned from the crisis.
One takes us on a path back toward personal accountability, individual responsibility, and success through hard work and innovation. It promises sustained prosperity by rewarding those who produce things of real and lasting value to our economy.
The other takes us on a path of cynicism and profiteering, where we glorify those who make a quick buck on the backs of unsuspecting people and extol those who game the government and taxpayers for their personal benefit.
I hope desperately that the lesson our young people learn is the first one.
That is why I wrote "Bullies of Wall Street."