Quiet Coup, the Inordinate Power

¶ … Quiet Coup, the inordinate power of the current financial sector over the government is brought to light. Basically, the current financial crisis in America is mimicking the crises of past emerging-market economies, calling for extreme government intervention in order to prevent another, even greater Depression. In the past few decades, the financial sector has grown monumental in size and profitability, causing a natural shift from government power to the power of financial oligarchs.

These finance monsters took advantage of this power to influence radical changes in government regulations that allow them to do pretty much whatever they like; and what they liked includes taking huge risks with what translates into taxpayer money in the long run. As a result of the extravagant risk-taking, in the short-term, the big banks seemed to be profiting enormously under this lack of supervision, further encouraging the government to place their trust and power in the hands of ever-growing financial giants.

But now that this bubble has burst, the United States is so far unwilling to acknowledge just how serious the situation has become. As Johnson warns, if the U.S. doesn't wake up to reality, Americans are teetering on the edge of a cliff to an even worse depression than the Great one. The problem is that America will not respond to advice the way an emerging-market economy in crisis would; they are too powerful and huge and too enmeshed in "mutually-beneficial" financial bonds with big banks.

So instead of nationalizing banks and salvaging whatever value remains for the sake of taxpayers, as well as reinstating regulations meant to prevent this kind of crisis, the U.S. is doing its best to appease old banking buddies and keep them afloat with handouts and payoffs. But as Johnson notes, allowing the current elite to stay in power is only making matters worse as the situation becomes more complicated and desperate.

These elites will now be tempted to do even more underhanded things with government bailout money, in attempts to cover up the severity of their crisis. This "putting lipstick on a pig" will only serve to provoke a downward spiral that will most certainly eventually crash. In my opinion, it is clear what must be done; I agree wholeheartedly with Johnson and Kwak. The United States government needs to wake up to the big picture and take a "tough love" stance with big banks.

These banks must be broken up and nationalized, strict regulations must be reinstated as a form of punishment for the abuses leading up to this crisis, and "good ole boy's club" symbiotic dependencies must be abandoned in order to save the global economy. As horrible as it sounds, some of the very, very rich may have to settle for just being very rich. And some white collar criminals in the financial sector will need to settle for even less. Other countries are falling hard already, and if the U.S.