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The Sciences

Big banks on track to take down U.S.A. Inc.?

Gene ExpressionBy Razib KhanSeptember 13, 2009 1:28 AM

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Keep reading stuff like this, A Year After a Cataclysm, Little Change on Wall St.:

Simon Johnson, a professor at the Sloan School of Management at the Massachusetts Institute of Technology and former chief economist of the International Monetary Fund, said that the seeds of another collapse had already sprouted. If major banks are allowed to keep making bets that are ultimately backed by taxpayer guarantees, they will return to the practices that led them to underwrite trillions of dollars in bad loans, Professor Johnson said.

This isn't really an ideological issue. Arnold Kling (who opposed the bailout) has been beating the drums on this issue for a year now. Rather, it is a "stakeholder" vs. non-stakeholder issue. It's a sign of our institutional sclerosis than the majority seem to agree that there are untenable systemic risks baked into the cake of our current financial-political complex, but the majority also rate the chance of mitigating the risk through regulation low. Perhaps the best sign of the lack of change is that employment in the finance sector has declined just 8 percent since last fall. We're in the full bloom of crony capitalism climax ecosystem.

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