The Kroog Versus The Banksters

Paul Krugman reviews yesterday's testimony on Capitol Hill of the bank CEOs before the Financial Crisis Inquiry Committee.

There were two moments in Wednesday’s hearing that stood out. One was when Jamie Dimon of JPMorgan Chase declared that a financial crisis is something that “happens every five to seven years. We shouldn’t be surprised.” In short, stuff happens, and that’s just part of life.

But the truth is that the United States managed to avoid major financial crises for half a century after the Pecora hearings were held and Congress enacted major banking reforms. It was only after we forgot those lessons, and dismantled effective regulation, that our financial system went back to being dangerously unstable.

As an aside, it was also startling to hear Mr. Dimon admit that his bank never even considered the possibility of a large decline in home prices, despite widespread warnings that we were in the midst of a monstrous housing bubble.

Still, Mr. Dimon’s cluelessness paled beside that of Goldman Sachs’s Lloyd Blankfein, who compared the financial crisis to a hurricane nobody could have predicted. Phil Angelides, the commission’s chairman, was not amused: The financial crisis, he declared, wasn’t an act of God; it resulted from “acts of men and women.”

Was Mr. Blankfein just inarticulate? No. He used the same metaphor in his prepared testimony in which he urged Congress not to push too hard for financial reform: “We should resist a response ... that is solely designed around protecting us from the 100-year storm.” So this giant financial crisis was just a rare accident, a freak of nature, and we shouldn’t overreact.

But there was nothing accidental about the crisis. From the late 1970s on, the American financial system, freed by deregulation and a political climate in which greed was presumed to be good, spun ever further out of control. There were ever-greater rewards — bonuses beyond the dreams of avarice — for bankers who could generate big short-term profits. And the way to raise those profits was to pile up ever more debt, both by pushing loans on the public and by taking on ever-higher leverage within the financial industry.

Sooner or later, this runaway system was bound to crash. And if we don’t make fundamental changes, it will happen all over again.

The best part?  Congressional Dems and Obama's econ team are siding with the banksters.  It's not that I believe in ten years we'll be back in the same boat as 2008, it's that ten years from now, we still won't have recovered to the point where we'll be above where we were in 2008 to qualify as ever have being in a different boat to begin with.

As Steve M. says on the notion that the GOP revival will only last as long as the economy is hurting:

Only last as long as the economy is in the tank? Oh, great -- it's going to be a lost political decade, too.

Dems refuse to do the populist, morally correct, and fiscally correct thing on the economy.  Taxing the banks to reclaim some TARP money isn't going to cut it, guys.  We need to fundamentally restructure our financial system.  Instead we're enshrining Too Big To Fail as fundamental law.

These banksters are vapid idiots.  They couldn't win a popularity contest with the ebola virus.  And yet the Obama guys happily perptuate the same system as before.