Lehman Brothers, with $639 billion in assets, filed for bankruptcy on this date in 2008. It was the largest bankruptcy in global history and set in motion the banking and financial crisis that has brought global capitalism to a near-standstill and damaged the wealth and well-being of millions of working people. The company was founded in 1850 by Henry, Mayer, and Emanuel Lehman, immigrant brothers from Bavaria who ran a dry-goods store and a cotton-trading business in Montgomery, Alabama that eventually transferred north and became the linchpin of the New York Cotton Exchange. By the early 20th century, the business was issuing bonds to underwrite businesses that included Woolworth’s, Gimbel’s and Macy’s, as well as Studebaker, Goodrich and Endicott-Johnson. Lehman Brothers was acquired by American Express in the 1980s and then spun off in the 1990s. Its bankruptcy — which is still being sorted out in offices and courts — was caused by overinvestment in subprime mortgages and mortgage-backed securities, along with shady accounting practices. “Within days,” wrote the New York Times, “the Treasury Department and Federal Reserve as well as governments around the world embarked on what became multi-trillion dollar efforts to keep the financial system from collapsing. Wall Street’s remaining investment banks sold themselves to bigger entities or converted into bank holding companies to secure federal protection. Job losses soared as the recession that had begun in late 2007 turned into the steepest downturn since the Great Depression.”
“Modern societies do not leave military security to private armies, nor education to private schools, nor ports, harbors and transportation systems to private conveyors, nor control of the money supply to private banks. . . . The extension of credit ought to be as equally socialised as dependence on credit has become. Lehman Brothers’ bankruptcy exposes big global private banking as unaffordable and anachronistic.” —Richard D. Wolff
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Two things need to be noted here. First, while I have the utmost respect for Richard Wolff, his comment is rather out-of-date. Today, armies have been privatized. The US simply hires mercenaries to kill and/or control the people in various countries in which they operate. While this has been done by the US government in the past, it is greatly expanded today.
Same goes for education. It is being handed over to private corporations with the support of both Democrats and Republicans who use their government positions to enrich themselves and their families and supporters in the process. Newark New Jersey’s rising star Democrat Cory Booker has been a national spokesperson on the issue while his brother owns one of the charter schools corporations.
As to the supposed financial crisis of 2008, a number of congresspersons have told of the scare stories concocted by the government to justify the massive giveaway of trillions of dollars to the rich. The supposed collapse of the financial system might be an attractive belief for present or former Marxists banking on (no pun intended) the collapse of capitalism to suddenly bring about the hoped for socialist society but it bears little resemblance to the facts.
In essence, capitalists gambled against themselves using hedge funds. When it became apparent that some were winning big and some were losing big, the losers whined that their losses just had to be covered by the American people (through taxes and inflation) or the whole world would crumble. The traditional chicken little story of imminent collapse so often told by various Marxists. Folks in congress either fell for it, were bribed, or saw it in their self interest to latch onto the story and give away a few trillion dollars – no one really knows how much was given away given no complete audit of the fed.
When folks on our side of the fence repeat and give credibility to their false scare stories, it prevents us from understanding the extreme degree of manipulation under which we all live today. There was no crisis except that some capitalists lost money while others gained that same money. No value disappeared. On the other hand, a recession occurred throwing a lot of people out of work. While trillions of dollars have been thrown at the rich suffering from their crisis, working people have not reaped equivalent benefits. Instead, they’ve seen a Democrat begin to defund social security through eliminating a portion of the tax that keeps it going. They’ve seen jobs exported to China, India, Russia, etc. causing uncounted unemployment because folks quit looking for work, cutbacks in social services, pensions attacked, and all the other ruling class economic tricks.
If the same set of circumstances had happened at a casino instead of a hedge fund, it would be clear to everyone that the losers at the table were pulling a scam to get the rest of us to subsidize their gambling losses.
At that time, the US taxpayer subsidized the supposedly “American” auto producer – General Motors. (The reality is that all corporations are today multi-national NOT American.) The corporation was “saved” bu the jobs were not and folks wondered why. This summer I went to Russia and learned that General Motors now produces chevrolets in Russia rather than here. So US tax dollars subsidize the production of cars by Russians for Russians.
What’s truly amazing is that Americans fall for this crap over and over again, believing the Democrats, including the progressive Democrats who scare them with horror stories that are merely the whining of the rich.
Global capitalism is not at a standstill. The stock market has almost doubled in the last 4 years. The rich have certainly gotten richer. On the other hand, working people still face massive and growing unemployment that is partially covered up by the numbers the government creates and then says describe reality.
The ruling class propaganda organs like the New York Times, claim “the Treasury Department and Federal Reserve as well as governments around the world embarked on what became multi-trillion dollar efforts to keep the financial system from collapsing.” Simply not so. They simply subsidized the losers in a complicated game played by rich folks. The claims of “the financial system from collapsing” is just the rhetoric they used to get Congress to go along.
I’m just finishing reading Richard Wollf’s interview book with David Barsamian called Occupy the Economy (http://rdwolff.com/content/occupy-economy-challenging-capitalism). It’s a very clear statement of what’s wrong with capitalism and why we need socialism.
His latest book is Democracy at Work: A Cure for Capitalism
http://rdwolff.com/content/democracy-work-cure-capitalism