What the 2008 Financial Collapse Shows Us About Coronavirus Financial Crisis w/Jon Stewart

Look at even 2008, right? So we have this enormous economic collapse in 2008. Housing market sinks and these derivative mortgage things go down and the world economy grinds to a halt. Thousands of people lose their job foreclosures all over the place. So they come in and they pump billions of dollars into the organizations that sunk the fucking ship in the first place. Yeah. That's where the money goes. And I remember asking the Treasury Secretary at the time, you know, this is a mortgage question, right? Because they, the derivatives made it like the geometric problem. So if they're bundling mortgages and 8% of those mortgages go underwater, it sinks the derivatives market, which is trillions of dollars as opposed to billions of dollars. So I said, you know, with all that money, what if you just made those mortgages that were underwater whole? Because the moment you do that, doesn't that fix your derivative problem? Don't you haven't you just made and plus then people get to keep their houses. And what he said to me was you can't do that because of moral hazard. So moral hazard is a theory that you can't incentivize bad behavior. So what he's saying is the people that took out mortgages on their homes that went underwater, that's their fault. So you can't bail them out because that would be sending a hazardous message morally about the economy. So I said, what's the moral hazard of then get making the people that actually blew up the economy whole again? What's that? How is that not moral hazard? And he said, the plane was on fire and we had to land. But they were the ones who lit the plane on fire. How are you you're rewarding them for that? Yeah. Yeah, it's. I've heard both sides of that argument. I've heard the argument that no nothing's too big to fail. Let it fail. And then I've heard the argument that if it did fail, it'd be so catastrophic. But I'm saying it wouldn't have failed. So it was a failure because they bought. Oh, yeah. Yeah, they did it all to themselves. But if you made the mortgages at the base of that, OK, so let's say 10% of the mortgages were underwater. But you know, so let's say you had a $200,000 mortgage and now the house is only worth $150,000. So instead of giving a million dollars to AIG at the top, give $50,000 to that mortgage, bring it into line with its value. Suddenly that thing's not underwater anymore. It's like putting ballast into a ship that's sinking. Put the ballast in the ship comes up rather than just saying, all right, we'll buy you another fucking ship. That almost seems too logical, though. That's right. That's kind of part of what's the problem with all this. But that's what I was saying. When you said that's moral hazard, I was just like, I don't even know what to do with that. Incentivizing bad behavior doesn't count when you're the ones who tank the economy. I mean, it's like what you're talking about today. Like if someone tried to say that these small businesses that are going under because of the COVID sanctions, because everybody's been locked down, rather, if those people need to pull themselves up by their bootstraps, it's a great example why that analogy sucks. Because like there's nothing to do, man. You can't work. There's nothing. It's like, what do you want them to do? There's no opportunity. It's everything shut down. If you go under at this time, it's not your fault. It's one of the rare times. If I'm the government right now, here's something I could do that's like, again, like it seems like a simple solution, which is like just suspend and extend. Yeah. So the country shut down, right? What's people's oftentimes biggest worry? My rent or my mortgage? Yeah. Suspend and extend. You know what? We're going to do a six month suspend. Nobody is going to pay. And if the landlords need to be helped out, that's where we'll focus. We'll make sure that the landlords don't go under from having to pay too much in taxes or having to pay too much in repairing. But attack the problem at its core, which is people's insecurity about they're unemployed. They have to still pay the rent and their mortgage or other bills. That's take a big chunk of their not oftentimes for people. Mortgage and rent is one of the biggest knots. Just fucking say like, because he's clearly we have the wherewithal and the money we're suspending and extending. Everybody like give people a chance to breathe just for a moment. And for the landlords, I'm not trying to dick them over like give them some kind of rent, a real estate tax break or some operating expense or keep everybody. You know, it's almost like like you're a patient on a ventilator, like let's just keep everybody a fucking life. Yeah. Till we get past this moment because they keep saying, well, we got to, you know, we got to reopen the economy. We are the economy. Right. There is no corporations, maybe people, but they corporations still can't catch COVID. We can. So I don't understand why they don't do something that seems simple and addresses like a real concern grassroots on the floor. Again, you're speaking too logically. I think it's just a it's such a difficult time to politically because the ideas get segmented into left or right. Right. Because of how to address COVID, how to address the economy, how to address all the everything becomes politicized and that's terrible. Yeah, it's really unfortunate because well, it's even yeah, it's it's it shouldn't be that way. And I'm not sure how it started that way. And it's really unfortunate.