Page 32 - Msingi Afrika Magazine Issue 19

Economy

The turnaround began in early 2009
after the passage of the infamous
Wall Street bailout kept the banks
operating and slowly restarted the
economy.

Who Is to Blame for the Great
Recession?
Many economists place the greatest
part of the blame on lax mortgage
lending policies that allowed many
consumers to borrow far more than
they could afford. But there’s plenty
of blame to go around, including:
The predatory lenders who market-
ed homeownership to people who
could not possibly pay back the
mortgages they were offered.
Cosmetic Act for misbranding not medically accepted indications The investment gurus who bought
Bextra with the intent to defraud or and therefore not covered by those those bad mortgages and rolled
mislead. Bextra is an anti-inflamma- programs. The civil settlement also them into bundles for resale to
tory drug that Pfizer pulled from the resolves allegations that Pfizer paid investors.
market in 2005. Under the provi- kickbacks to health care providers
sions of the Food, Drug and Cos- to induce them to prescribe these, The agencies who gave those mort-
metic Act, a company must specify as well as other, drugs. The feder- gage bundles top investment ratings,
the intended uses of a product in al share of the civil settlement is making them appear to be safe.
its new drug application to FDA. $668,514,830 and the state Medic- The investors who failed to check
Once approved, the drug may not aid share of the civil settlement is the ratings, or simply took care to
be marketed or promoted for so- $331,485,170. This is the largest civil unload the bundles to other inves-
called “off-label” uses – i.e., any use fraud settlement in history against a tors before they blew up.
not specified in an application and pharmaceutical company.” (Extract
approved by FDA. Pfizer promoted from: https://www.justice.gov/opa/ Which Banks Failed in 2008?
the sale of Bextra for several uses pr/justice-department-announc- The total number of bank failures
and dosages that the FDA specifical- es-largest-health-care-fraud-settle- linked to the financial crisis cannot
ly declined to approve due to safety ment-its-history, 2009) be revealed without first reporting
concerns. The company will pay a this: No depositor in an American
criminal fine of $1.195 billion, the The 2007-8 Financial Crisis bank lost a penny to a bank failure.
largest criminal fine ever imposed “The 2007-2009 financial crisis That said, more than 500 banks
in the United States for any matter. began years earlier with cheap credit failed between 2008 and 2015,
Pharmacia & Upjohn will also for- and lax lending standards that fueled compared to a total of 25 in the
feit $105 million, for a total criminal a housing bubble. preceding seven years, according to
resolution of $1.3 billion. the Federal Reserve of Cleveland.16
When the bubble burst, financial in- Most were small regional banks, and
In addition, Pfizer has agreed to stitutions were left holding trillions all were acquired by other banks,
pay $1 billion to resolve allegations of dollars worth of near-worthless along with their depositors’ ac-
under the civil False Claims Act investments in subprime mortgages. counts.
that the company illegally promot- Millions of American homeowners
ed four drugs – Bextra; Geodon, found themselves owing more on The biggest failures were not banks
an anti-psychotic drug; Zyvox, an their mortgages than their homes in the traditional Main Street sense
antibiotic; and Lyrica, an anti-epilep- were worth. but investment banks that catered
tic drug – and caused false claims to The Great Recession that followed to institutional investors. These
be submitted to government health cost many their jobs, their savings, notably included Lehman Brothers
care programs for uses that were or their homes. and Bear Stearns. Lehman Brothers

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