Skip To Content
JEWISH. INDEPENDENT. NONPROFIT.

Support the Forward

Funded by readers like you DonateSubscribe
Back to Opinion

Sub-Prime Protections

Hard on the heels of the sub-prime mortgage crisis that is rattling the world’s financial markets and threatening millions with homelessness, new troubles are brewing in the airline industry, one of the pillars of the economy. It’s getting to the point where flying is as risky as staying in your house.

The mortgage crisis, alert readers recall, has been rolling through the American economy for the past year, wreaking havoc in every conceivable direction. The seeds were planted in the past decade, as reckless lending institutions began giving out mortgages to people who couldn’t afford them and rigged them so that payments started low and ballooned down the road. Those bad mortgages were then packaged into debt securities that were sold to other financial institutions, which expected to collect as the mortgages were paid off. When the balloons started blowing up, institutions around the world found themselves holding billions of dollars in worthless paper.

As the chaos has spread, banks have stopped giving out new loans, leaving businesses short of cash, slowing down sales and putting workers out of work. All this while homeowners with bad mortgages are finding themselves foreclosed and homeless by the thousands. That number is expected to rise into the millions in the months ahead.

Now there’s trouble in the skies, too. American Airlines, one of the nation’s largest, was forced to cancel hundreds of flights for several days running this month, stranding thousands of passengers, in order to check the wiring in some of its planes. The sudden inspections came just days after the Federal Aviation Administration was caught sleeping through safety inspections at Southwest Airlines and had to slap the firm with a $10 million fine. That occurred, in turn, the same week that four smaller airlines — ATA, Aloha, Skybus and Skyway — went under, so to speak.

To hear the pundits and politicians talk, the various disasters have nothing to do with one another. The failures of the small airlines are blamed on high oil prices. The faulty safety inspections at the bigger airlines are being pinned on inattention within the FAA. Fault for the mortgage crisis has been laid at the feet of everyone from unscrupulous lenders to overenthusiastic first-time homeowners to poor interest-rate planning by Alan Greenspan. There is, however, one common denominator: deregulation. For three decades, politicians and business leaders have been stripping away federal oversight of one industry after another, claiming they want to get government off our backs and free up the markets. Now the markets are doing what markets do — namely, fluctuating.

The idea of deregulation was to free up businesses to operate more nimbly and make more money, which they would use to create more businesses and more jobs. Operating more nimbly has meant quick growth and enormous instability. New airlines spring up and just as quickly go bust, leaving people stranded. To compete, airlines cut prices on some lines and raise them on others, continually cutting back on service and, it appears, even safety.

As for banks and finance companies, they’ve been freed up to develop pyramid schemes of every sort, destabilizing whole industries and ending the long-term security and good benefits that once characterized the American job market. And with depressing regularity the Ponzi schemes collapse, throwing the economy into chaos and costing taxpayers billions in bailouts.

The payoff has come in huge new profits for managers and big investors, much smaller payoffs for some, and yawning inequality for everybody else. When the crash comes, as it always does, it’s rarely the managers or speculators who end up with their furniture on the sidewalk.

Governments are instituted with the consent of the governed in order to protect us from danger and misfortune. They’re dismantled by fast-talking pickpockets. We should be more careful.

Engage

Republish This Story

Please read before republishing

We’re happy to make this story available to republish for free, unless it originated with JTA, Haaretz or another publication (as indicated on the article) and as long as you follow our guidelines. You must credit the Forward, retain our pixel and preserve our canonical link in Google search.  See our full guidelines for more information, and this guide for detail about canonical URLs.

To republish, copy the HTML by clicking on the yellow button to the right; it includes our tracking pixel, all paragraph styles and hyperlinks, the author byline and credit to the Forward. It does not include images; to avoid copyright violations, you must add them manually, following our guidelines. Please email us at [email protected], subject line “republish,” with any questions or to let us know what stories you’re picking up.

We don't support Internet Explorer

Please use Chrome, Safari, Firefox, or Edge to view this site.