If you haven’t read or seen The Big Short, do it. I see many similarities between our latest financial crisis and the drinking water crisis in Flint, Mich. But only in terms of who’s going to pay, not who’s at fault.
It's the story of how authorities that exist to evaluate creditworthiness let themselves be bought off. Instead of independently examining bonds made from shaky mortgages, ratings agencies used models provided by the products’ developers. Everyone who created, sold, bought, insured, and traded the worthless financial instruments felt protected or justified because the rating agencies blessed them.
I’d be shocked if you don’t know at least one friend or family member who lost his job after the subprime mortgage market finally collapsed. But only one person went to jail. Then we, the taxpayers, bailed out the perpetrators.
What’s so sad is that the Great Recession isn't the first macroeconomic trend that has victimized the 99,000 residents of Flint.
Michael Moore’s 1989 documentary Roger & Me explains what happened when U.S. automakers sent manufacturing to Mexico. More recently, the city had four emergency managers in as many years. To learn why residents drank lead-tainted water for at least a year, check out Michigan Public Radio’s excellent analysis.
Now there's a lot of finger-pointing.
Two Michigan Department of Environmental Quality employees have been suspended. Defendants in the dozen lawsuits filed since last November include an engineering firm and city employees.
When the Deepwater Horizon oil rig exploded in 2010, its owner created a fund to compensate people whose family members and livelihoods were destroyed. BP’s paid out almost $7 billion and processed more than $1 million in claims for economic damages since then.
Some legal experts suggest that the State of Michigan do the same. But where would the money come from?
State taxpayers!
Here’s the bottom-line problem: Financial derivatives and drinking water regulations are boring and difficult. It’s easy to assume the authorities are doing the right thing, but irresponsible.
Innocent people, and they’re usually poor, are hurt, sometimes irreparably. Sometimes we know the victims, sometimes not.
But when it's time to pick up the pieces, we do know the victims. They’re us.
