sigmundcarlandalfred.wordpress.com

In 1989, the CEOs of our seven largest banks earned an average of $2.6 million. In 2007, the average CEO income had risen to $26 million. The ordinary citizen might believe that this is grotesque overcompensation, but the financial sector found the pay perfectly reasonable. A year later, this sort of thinking led us to the brink of complete financial collapse. The financial crisis of 2008 now looks more and more like a defining moment, a crisis of capitalism. Globally, it has produced, in addition to a crippling recession, an unending debt crisis. Our own escalating, unpayable debt makes the future of U.S. power increasingly uncertain. Government borrowing and spending policies have failed to stimulate growth in the economy.

The crisis is, at its heart, a cultural failure combined with a political collapse. Behavior by bank executives that once was discouraged by a lifted eyebrow created complex structures abetted by an aggressive reading of the statutes—anything not explicitly prohibited was considered permissible. As Mervyn King, governor of the Bank of England, put it, “There was a cultural tendency to be always on one side and always to be pushing the limits.” The crisis almost immediately destroyed the rule of law. Secretary of the Treasury Henry Paulson told The Washington Post in November 2008: “Even if you don’t have the authorities—and frankly I didn’t have the authorities for anything—if you take charge, people will follow. Someone has to pull it all together.” In 2011, Phil Angelides, chairman of the U.S. Financial Crisis Inquiry Commission, summarized the problem: “These banks are too big to fail. They’re too big to manage. They’re too big to regulate. They’re too complex to understand and they’re too risky to exist. And the bottom line is they offer very little benefit.”

More