By Simon Johnson
Inspite of its key position in developing the ruinous monetary situation of 2008, the yankee banking has grown larger, extra ecocnomic, and extra immune to legislation than ever. Anchored by way of six megabanks whose resources volume to greater than 60 percentage of the country’s gross household product, this oligarchy proved it could actually first carry the worldwide financial system hostage after which use its political muscle to struggle off significant reform. 13 Bankers brilliantly charts the increase to energy of the monetary region and forcefully argues that we needs to get a divorce the massive banks if we wish to stay away from destiny monetary catastrophes.
Updated, with extra research of the government’s fresh try to reform the banking undefined, this can be a well timed and professional account of our stricken political economic system.
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Extra resources for 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown (Vintage)
In order to raise cash quickly, banks were forced to sell whatever they could, pushing down asset prices across the board; stock prices also fell as banks cut back on loans to stockbrokers. 61 Any bank has deposits that customers can withdraw immediately, while many of its loans (such as mortgages) cannot be called in on demand. As banks stop lending, borrowers are forced to liquidate assets in order to pay off their debts, reducing asset prices even further and creating more pressure on banks.
What we do know is that by 1998, when it came to questions of modern finance and financial regulation, Wall Street executives and lobbyists had many sympathetic ears in government, and important policymakers were inclined to follow their advice. Finance had become a complex, highly quantitative field that only the Wall Street bankers and their backers in academia (including multiple Nobel Prize winners) had mastered, and people who questioned them could be dismissed as ignorant Luddites. No conspiracy was necessary.
However, these policies did little to disturb the concentration of money and power that had taken place in the financial sector in parallel with the rise of the industrial trusts. 59 Instead, the interaction between large industrial trusts and their bankers created the backdrop for the worst financial crisis in American history to date, which brought concentrated banking power to the political forefront. 60 The panic soon spread to the Knickerbocker Trust Company, one of the largest financial institutions in New York, and then to many other banks in the city.