‘Banks emerged from the crisis bigger, more powerful, and more systemically dangerous than ever before’
From Boston Review:
The economy teetered on the brink but did not fall into the abyss. The bailouts, the stimulus, and adequate international political comity —each imperfect, even ugly—nevertheless prevented what was otherwise very likely: another Great Depression.
But the collective sigh of relief and overconfident pronouncements emanating from Wall Street and Washington obscure the fact that we have done little to avert an even worse crisis in the future. We may have stanched the bleeding, but the underlying disease—a culture, ideology, and political economy of uninhibited finance—remains. Indeed, by tiptoeing around the real issues we may ultimately make things worse.
The roots of our current problems trace to the 1970s, when decades of heavy regulation and boring banking (and a quarter century of unprecedented economic growth) gave way to a liberation of international capital flows and, later, successful experiments with microeconomic deregulation. The Reagan revolution of the 1980s unwisely applied this deregulatory zeal to the financial sector. Banking became exciting again—so exciting that, amid fraud and excess, 2,000 banks failed. The Savings and Loan Crisis was the first American banking crisis in 50 years; it was contained by a massive government bailout.