Remember all of those banks that were “too big to fail” and had to be bailed out? Newsweek’s Niall Ferguson is out with a report today pointing out that a year after the collapse of Lehman Brothers signaled the start of the bailout boom, they’re still big, and thanks to the safety net you tossed them, they’re “back to making serious money and paying million-dollar bonuses. Meanwhile, every month, hundreds of thousands of ordinary Americans face foreclosure or unemployment because of a crisis caused by … a few Wall Street giants.”
The Newsweek article summarizes the litany of complaints that have been raised over the past year, including the failure of the government to create a strong regulatory framework to keep big banks from playing Texas Hold ‘Em with your money. Ferguson’s biggest concern is the fact that a handful of financial companies now control the majority of the country’s wealth: “Between 1990 and 2008, according to Wall Street veteran Henry Kaufman, the share of financial assets held by the 10 largest U.S. financial institutions rose from 10 percent to 50 percent.” That share has only grown since last year. And, as the article points out, the old saw about “the bank owning you” if you’re a small borrower is truer than ever:
…[W]hat makes the losers in this crisis really mad is the fact that there’s now one law for the small debtors and another for big ones. If you lose your job and fall behind on your $1,500 monthly mortgage payment, no one’s going to bail you out. But Citigroup can lose $27.7 billion (as it did last year) and count on the federal government to hand it $45 billion.
How does Ferguson propose we dig ourselves out of this mess? For one thing, by letting those “too big to fail” banks fail, or at least shrink down to a more manageable size. “What’s needed is a serious application of antitrust law to the financial-services sector and a speedy end to institutions that are “‘too big to fail.’” Failing that, there are always pitchforks: “…if the status quo persists, the danger of a populist backlash against both Wall Street and Washington will only grow,” he writes. “Such a backlash has more than one precedent in U.S. history.”
Wall Street’s New Gilded Age [Newsweek]