As we prepare to celebrate the third anniversary of the Lehman Brothers bankruptcy and the ensuing financial crisis, it's a good time to assess the situation and ask what has changed. The answer is not encouraging.
Very little has changed about either the realities on the ground or the intellectual debate on economic issues in the last three years. The "too-big-to-fail" banks are bigger than ever as a result of crisis induced mergers. Financial industry profits now exceed their pre-crisis share of corporate profits, and executive pay and bonuses are again at their bubble peaks.
None of the executives who pushed and packaged fraudulent mortgages has gone to jail. Even those who have faced civil actions, like Countrywide's Angelo Mozilo, have almost certainly still come out ahead after making large payments to settle suits.
And all the top policy people who guided us to this economic disaster are still doing just fine. When former Fed Chairman Alan Greenspan isn't collecting his seven-figure salary from Pimco, the country's largest bond fund, he is sharing his wisdom with the world on the Sunday morning talk shows.
More importantly, little of their perceived wisdom has been questioned. Central banks around the world are still targeting 2% inflation as their main, if not only, policy goal. They are acting as though nothing in the world has happened that might cause us to question this policy.
In some ways, this is an incredible turn of events. However, it also should have been entirely predictable. The same people who controlled the key levers of power before the collapse continued to control them after the collapse. They created an official story and ensured that people heard little else.
In this official story, the cause of the economic downturn was the financial crisis. This, in turn, was caused by the proliferation of complex financial instruments, which, it turns out, in retrospect no one fully understood. In this view, it was just bad luck that overtook Greenspan, Bernanke and the rest. They may have been overly optimistic about self-regulation in financial markets, but no one could have known that anything like the financial tsunami following Lehman could happen.
In fact, in the official story we are supposed to be thankful that we did not get a second Great Depression. While this prospect is absurd on its face (the first Great Depression was the result of 10 years of failed policy, not just the mistakes made at its onset), those in positions of power and responsibility repeat this line endlessly.
It is quite disturbing that the high-flyers in the financial industry and their supporters in the policy world can wreck the economy and ruin tens of millions of lives, yet still maintain their control over policy and suffer almost no consequences themselves. But why would we expect anything else?
All the Greenspan sycophants in the media and the policy world were not going to own up to the fact that they....
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