Monday, September 24, 2012
Simon Johnson, on Slate, tells us:
"No one has succeeded in the modern American political game like the biggest banks on Wall Street, which lobbied for deregulation during the three decades prior to the crisis of 2008, and then pushed back effectively against almost all dimensions of financial reform. Their success has paid off handsomely. The top executives at 14 leading financial firms received cash compensation (as salary, bonus, and/or stock options exercised) totaling roughly $2.5 billion in from 2000 to 2008, with five individuals alone receiving $2 billion. But these masters of the universe did not earn that money without massive government assistance. By being perceived as “too big to fail,” their banks benefit from a government backstop or downside guarantee. They can take on more risk—running a more highly leveraged business with less shareholder capital. They get bigger returns when things go well and receive state support when fortune turns against them: heads they win, tails we lose. And the losses are colossal. According to a recent report on the aftermath of the 2008 crisis, prepared by Better Markets, an advocacy group that pushes for stronger financial reforms, the cost to the U.S. economy of the financial crisis—caused by financial institutions’ reckless risk-taking—amounts to at least $12.8 trillion. A big part of this cost has come in the form of jobs lost and lives derailed for the bottom 47 percent of the American income distribution."