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Warren: We Are Headed for Financial Crisis as Bad as 2008

Warren: We Are Headed for Financial Crisis as Bad as 2008
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Thursday on MSNBC’s “The Rachel Maddow Show,” Sen. Elizabeth Warren (D-MA) predicted that coronavirus could cause a global financial crisis as large as 2008.

Maddow asked, “You rose to national prominence around the last global financial catastrophe, predicting it, crucially helping explain it while it was happening, and then trying to save us from its impact. This crisis we’re going through now and heading into now because of coronavirus is different. Is it reasonable to be worried this might be a financial disaster of a similar scale?”

Warren said, “Yes.”

She continued, “Understand it this way. Before coronavirus was on anybody’s radar screen, this economy was already showing the cracks. Lending defaults, loan defaults were up. Small businesses were failing and not able to help pay their — not able to service their debts. There were declines in manufacturing. You kind of can see shaky signs in the economy, problem number one. And number two, the Trump administration had spent the bail-out tools. So they’d done this ginormous tax break and ballooned the debt and done rate cuts to juice the economy. And the consequences of both of those had not been investment in the real economy. It had been to do things like stock buybacks that produced things for a handful of folks at the top and executives but didn’t actually create more goods and more services in the economy.”

She added, “So, OK, so you’ve got a kind of cracky economy, and you’ve got the tools spent down and along comes the coronavirus. And now you’re going to get hit again because it’s things like supply chains. The trucks that are stopped in China and just literally the stuff is just not coming over. So manufacturers here in the United States that need 147 parts to put something together to send it out, two of those parts come from China, you’re done. You need to the ingredients to be able to manufacture a drug, and two of those come from China, and you’re just done on this. So that starts twisting the economy. Then part two, you have an economy right now that is deeply interrelated. Five big banks in America now, and they’re not only here, they’re tied all around the world. So as soon as one of these businesses that can’t do its manufacturing or can’t produce its drugs because it has a supply chain problem, can’t make a loan payment, and you start stacking those up all of a sudden—those banks they’re in trouble themselves. More defaults on the loans. Now the banks start to get in trouble.”

She concluded, “There’s a third problem, an incompetent administration. An incompetent administration is like its own natural disaster. When you’ve got a president who engages in magical thinking and says, no, he decided there were only 15 cases, and they would all be gone by April. And whatever it is he decides, my gosh, it almost doesn’t matter what he decides. The point is he’s not listening to the scientists. He’s not listening to the experts on this. And then he picks Mike Pence as the person in the White House who’s really going to be in charge of this. He picked the one person who actually has experience with a health care crisis, and that was back in Indiana, and Mike Pence was in charge as governor as made it a whole lot worse. It’s like the worst of all connections here. So if we were doing our dead-level best and going at this smart, we’d be working on the coronavirus. We’d be working on the tests as you talked about at the top, the vaccines. We would set aside a big fund of money so that we now would let anybody take sick leave who is diagnosed so people can keep themselves inside and try to slow down the spread. There are a lot of steps we could be taking on. They’re not taking them on. They’re engaged in a magical thinking. But there’s also steps we could be taking on the economic front, and it’s not just a rate cut, it’s actually we need to be talking about stimulus now. And look, yeah, they did the tax cuts and ran the debt up, and that makes it a lot tougher for us to get stimulus through now. So all these pieces are related to each other, and none of them are good.”

Follow Pam Key on Twitter @pamkeyNEN

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