in an article on Project Syndicate
America has expanded its corporate safety net in unprecedented ways, from commercial banks to ... automobiles, with no end in sight. In truth,... this is an extension of long standing corporate welfarism. The rich and powerful turn to the government to help them whenever they can, while needy individuals get little social protection.Joseph Stiglitz. The best economist of the 21st Century. As I read it, Stiglitz is saying the financial crisis is becoming a political crisis and may well take the political process down.
We need to break up the too-big-to-fail banks; there is no evidence that these behemoths deliver societal benefits that are commensurate with the costs they have imposed on others. And, if we don't break them up, then we have to severely limit what they do. They can't be allowed to do what they did in the past - gamble at others' expenses.
This raises another problem with America's too-big-to-fail, too-big-to-be-restructured banks: they are too politically powerful. Their lobbying efforts worked well, first to deregulate, and then to have taxpayers pay for the cleanup. Their hope is that it will work once again to keep them free to do as they please, regardless of the risks for taxpayers and the economy. We cannot afford to let that happen.