Finance

The Obama administration response was conservative consensus. Though it launched the largest fiscal stimulus in U.S. history and advocated for financial reform, those measures were designed to stabilize and fix the existing system of capitalism, not to reorganize it. The fundamental economic model—asset price inflation, financialization, and hopes about markets—remained intact. The government protected large banks, placed  importance on investor confidence, and maintained orthodoxy of a credit economy. “In the end, despite the largest fiscal stimulus in the nation’s history, significant legislative reforms, and an unconventional monetary policy… no major transformation of the U.S. economy occurred” (Levy 2021, 717). While there were temporary changes towards regulation and stimulus, they were not accompanying structural changes. Levy states that “politics failed to chart a viable new long-term vision of economic life” in this crisis

The U.S. Treasury and the Federal Reserve have immense powers since modern capitalism, especially since the 1980s, is very much dependent on liquidity and financial markets. During crises, especially when trust in transactional liquidity evaporates, only institutions like the Fed and Treasury can respond fast and aggressively enough to prevent total collapse. As Levy stated, in the Age of Chaos, the Fed took on the role of dealer and lender of last resort, and the Treasury infused capital into insolvent institutions to prop up the system. “The Fed was now ‘lender’ and, for the first time ever, the ‘dealer’ of last resort—announcing it would stand ready as the buyer of last resort for sellers of assets” (Levy 2021, 709).  Their authority stems from the  need to ensure economic stability—even if it means acting beyond normal democratic institutions in times of crisis.