As Stocks Tumble, Wealthy Speculators Bid Up House Prices

The long-run effect of Obama’s choice to bail out lenders, not borrowers

The Obama administration’s most consequential decision was to address the Great Financial Crisis by bailing out the finance sector, rather than borrowers. It was an unforced error, directed by Goldman Sachs bankers elevated to the ranks of finance regulators, and we are still living with its consequences.

The choice to enact quantitative easing (rather than debt relief, direct transfers to consumers, or regulation of mortgage-backed securities) triggered the foreclosure crisis, wiped out family wealth (especially Black wealth, which declined more under Obama than any other president), and produced a still-inflating asset bubble.

It also set a precedent, shifting the Overton window in a way that made the trillions that Trump pumped into the capital markets (first through massive tax cuts, then through Covid programs) seem bipartisan.

Today, the capital markets are utterly uncoupled from the real economy. The stock market’s unprecedented bull run coincided with a decline in the fortunes of real businesses and real workers, and the overslosh produced bubbles in other asset classes, including some absolutely absurd ones (cryptos/NFTs, wine, art, supercars…