Was the Shutdown Always a Giveaway to Wall Street?

Though counter-intuitive for many, some very basic knowledge about the operational laws of banking render a very coherent reason to wonder if the shut-down was really a bail-out...


There is no doubt in my mind that the government shutdown, ended on Friday night, January 25, 2019, after 35 days by a peace treaty of sorts between the Democrats and Republicans, always included ego as a major motivation for both sides. Case in point: the video posted above.

But what if that bluster and blunder was all really just a smokescreen for a much more intricate and subtle shell game of doing a gigantic favor for the financial industry?

Let’s start with understanding some basic principles that underwrite banking.

First, one should realize that every deposit made into a bank is actually money lost by the bank. Remember, when you put your cash into your account, it doesn’t go into a lock box or under the mattress, the bank instead marks your deposit as a debt and uses the cash you gave them to do business with other customers. This is why your account accrues interest: it’s a basic debtor’s obligation to expect and pay for interest to a creditor.

Second, consider the inverse, namely that every banking loan is money made by the banks. As a creditor they can expect to regain the principal and they can almost be certain to make extra through interest accrued over the life of the loan. It might take a little time but, when you realize that major banks have lifespans of centuries, the waiting periods are pretty minuscule in comparison.

Now, consider the shutdown. Trump was shameless about saying that federal employees should either negotiate loans or various other arrangements with landlords, service providers, and other parties they would otherwise be doing business with.

How many of those workers actually went to a bank and took out a loan? Furthermore, consider this fact: the public sector is the largest employer of African-Americans, who infamously have to deal with systemic discrimination that forces them to turn to the slimiest sector of the financial industry for banking services. (As was the case with the subprime mortgage scam.)

In other words, how many workers who took out a loan during the shutdown were forced by racism to turn to commercial banks with a long history of predatory lending practices? Tabulating that sum is a large sociological challenge we may never achieve. But if there should be a large scandal involving racially-motivated predatory lending in the next few years, the shutdown perhaps may turn out to have been one of the catalysts.

That might seem far-fetched, but look at what the Clinton-Gingrich standoff bred in its wake?

Indeed, not only did a certain intern catch the eye of Bubba because of the 1995 shutdown, but Robin Blackburn has coherently argued that it in fact prevented Social Security from being privatized by the Democrats after they had succeeded in abolishing the welfare system!

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