The May 2009 Atlantic article “The Quiet Coup” by Simon Johnson, an MIT Sloan professor, has strong echoes of the April 2009 Harper’s magazine. The Harper’s author noted that financial firms took home roughly 40 percent of U.S. corporate earnings, which drained all of the smart people out of the manufacturing economy and into paper shuffling. The Atlantic article says that banana republics get into trouble because “powerful elites within them overreached in good times and took too many risks” (echoes of Mancur Olson). “inevitably, emerging-market oligarchs get carried away; they waste money and build massive business empires on a mountain of debt. Local banks, sometimes pressured by the government, become too willing to extend credit to the elite and to those who depend on them. … In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets (and only in emerging markets): South Korea (1997), Malaysia (1998), Russia and Argentina (time and again). .. elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse.”
“From 1948 to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of the average for all domestic private industries. From 1983, it shot upward, reaching 181 percent in 2007.”
“Big banks, it seems, have only gained political strength since the crisis began.”
“Treasury is trying to negotiate bailouts bank by bank, and behaving as if the banks hold all the cards—contorting the terms of each deal to minimize government ownership while forswearing government influence over bank strategy or operations. Under these conditions, cleaning up bank balance sheets is impossible.”
“Boris Fyodorov, the late finance minister of Russia, struggled for much of the past 20 years against oligarchs, corruption, and abuse of authority in all its forms. He liked to say that confusion and chaos were very much in the interests of the powerful—letting them take things, legally and illegally, with impunity.”
More: read Quiet Coup”
Actually it is more like Weimar Republic without the antisemitism.
There is an underlying problem that has led to the presumed overcompensation paid to Wall Street traders, salesmen and executives. That problem is the issuing of publicly tradable stock by banks and trading firms. It used to be that one worked on Wall Street with the hope of making partner within their firm. Partners made a very nice living but were required to put a very large percentage of their earnings into equity with the firm. This is how firms grew. This also kept the partners financially interested in the goings on within the firm. Its hard to imagine a Wall Street CEO of that era not knowing, intimately, the workings of every type of security within his firm’s trading portfolio. When your own money is on the line your level of due diligence is much higher than that of caretaker management. This was all done without any sort of regulation requiring it. Today’s Wall Streeters don’t seem to have that sort of self control.
http://whatilearnd.com/post/119947605/0-000000435