Seeing the ‘bigger picture’


In response to Samuel T. Foust’s letter to the editor appearing Nov. 10, 2021, a short list of verifiable facts are gladly offered in order to see the bigger picture:

In February 2009, in response to significant weakness in the economy brought on by the panic and uncertainty in the financial system plunging the nation into the longest and deepest recession in generations, lawmakers enacted the American Recovery and Reinvestment Act.

The legislation’s numerous spending and revenue provisions can be grouped into several categories according to their focus:

Providing funds to states and localities—for example, by raising federal matching rates under Medicaid, providing aid for education, and increasing financial support for some transportation projects;

Supporting people in need — such as by extending and expanding unemployment benefits and increasing benefits under the Supplemental Nutrition Assistance Program (formerly the food stamp program);

Purchasing goods and services — for instance, by funding construction and other investment activities that could take several years to complete; and

Providing temporary tax relief for individuals and businesses — such as by raising exemption amounts for the alternative minimum tax, adding a new Making Work Pay tax credit, and creating enhanced deductions for depreciation of business equipment.

When the act was being considered, the Congressional Budget Office and the staff of the Joint Committee on Taxation estimated that it would increase budget deficits by $787 billion between fiscal years 2009 and 2019. CBO now estimates that the total impact over the 2009–2019 period will amount to nearly $840 billion. By CBO’s estimate, close to half of that impact occurred in fiscal year 2010, and more than 95 percent of the act’s budgetary impact was realized by the end of December 2014.

In May 2009, Congress passed the Fraud Enforcement and Recovery Act ( Public Law 111-21), which created The Financial Crisis Inquiry Commission to “examine the causes of the current financial and economic crisis in the United States.”

More than two years after the worst of the financial crisis, our economy, as well as communities and families across the country, continued to experience the aftershocks.

Millions of Americans had lost their jobs and their homes, and the economy was still struggling to rebound.

The commission’s report provided a historical accounting of what brought our financial system and the economy to a precipice and helped the policymakers and the public better understand how the calamity came to be.

The commission concluded that, as massive losses spread throughout the financial system in fall 2008, many institutions failed, or would have failed but for government bailouts As panic gripped the market, credit markets seized up, trading ground to a halt, and the stock market plunged.

The scale and nature of the over-the-counter derivatives market created significant systematic risk throughout the financial system and helped fuel the panic in fall 2008; millions of contracts in this opaque and deregulated market created interconnections among a vast web of financial institutions through counterparty credit risk, thus exposing the system to a contagion of spreading losses and defaults.

Financial market uncertainty included “bank runs” on financial institutions derivative operations through novation, collateral demands, and refusals to act a counterparties.

We faced either the total collapse of our financial system or spending trillions of dollars of taxpayer money to stabilize the system and prevent catastrophic damage to the economy.

In the process, the government bailed out a number of financial institutions deemed “too big to fail.”

As usual, Mr. Foust, like a broken partisan clock, does get the bankruptcy of Solyndra Corp. right, but his wild and unsupported accusations and scurrilous insinuations are troubling as partisan sniping, but far worse, is the totally unserious nature of his commentary and his failure to credit attempts at good governance when dealing with disastrous marketplace failures that only government can deal with.

Harry Shatz