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Exploiting Poverty Caused the Financial Crisis

Sally Kohn

Sure, the CEOs and hedge fund managers were greedy. There's no question that wealth and the pursuit thereof led to the sub-prime fiasco and the decline of Lehman Brothers, AIG, Merrill Lynch and more. But what's really at play here is persistent poverty and Wall Street seeking to make a dime off the poor, consequences be damned, while Washington looks the other way.

The sub-prime crisis is the result of good people getting bad loans. Loans that triple or quadruple in interest rates, riddled with small print, are unbearable by most homeowners. But they are particularly unsustainable for low-income families working two or three jobs to make ends meet. Still, lenders scammed hardworking families with the promise of owning homes they really couldn't afford. And then greedy Wall Street managers, looking for a new way to squeeze a buck from an already bursting-at-the-seams economy, bundled up these bad loans into worse securities, sold them off, and tried to gain a profit as our national economy lost its shirt.

We could have averted the current financial crisis by creating affordable housing and good jobs, strengthening public education and providing health care and child care for all families, to help hardworking Americans thrive in the middle class instead of being pushed into poverty. We could have averted this crisis if we really cared about all families owning their own homes and created nationwide programs including affordable loans. (Even subsidized loans in the first place would have cost taxpayers less than what we're now spending bailing out Wall Street.) We could have averted this crisis if we put the needs of the majority of American families ahead of the needs of a small minority of greedy investors.

Now, 8,000 American families a day face foreclosure. But instead of prioritizing poor and even middle class families who are increasingly struggling, our government is spending billions and billions to bail out the Wall Street firms that created this crisis. Instead, we should be spending our taxpayer money to help the families who were taken advantage of in the "anything goes" unregulated financial system that years of misguided never-really-did-trickle-down economic policy created. These families need the government to help re-adjust their mortgages and cover bridge payments to avoid foreclosure.

The fundamentals of our economy are not sound. Real wages for the majority of American families have been declining while CEO salaries are at an all-time high. Health care costs and college tuition are crippling more and more families. The middle class is rapidly disappearing, and more and more of us find ourselves struggling while the gap between the rich and poor grows.

Instead of allowing Wall Street to profit off of poverty, we should fix our economy once and for all, to work better for all of us. We need universal health care, including a government-funded insurance option, to help families get out from under mounting health care debt. We need policies that reign in scam lending, from housing to the credit card industry. We need a nationwide living wage and a massive public jobs program, to address underemployment in our unstable economy while helping build essential shared infrastructure like public transportation and schools. We need new trade and immigration policies that work for working people on both sides to the border. And we need new corporate rules of the game that make big business accountable to communities and workers, not just greedy investors.

Wall Street and conservative economists have insisted that, in our laissez faire system, everyone is on their own. The poor were left on their own, to fend for themselves against twisted economic structures backed by the biggest institutions on Wall Street. Washington never left Wall Street on its own, and as Wall Street's scam deflates, Washington is coming to the rescue. But shoring up Wall Street won't make our economy work. We need to ensure that a greedy few can't exploit those who are struggling. Without poor people, this crisis would have never happened. If we prioritize ending poverty, and preventing more and more Americans from slipping into poverty, we can be sure it won't happen again.

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Sally Kohn is the Director of the Movement Vision Lab at the Center for Community Change.

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