Banks Own the US Government

There are smart ways to raise money and regulate the market, but Wall Street is working to kill any meaningful financial reform

by Dean Baker

Last month, when the US Congress [1] failed to pass a bankruptcy reform measure that would have allowed home mortgages to be modified [2] in bankruptcy, senator Dick Durbin succinctly commented: "The banks own the place. [3]" That seems pretty clear.

After all, it was the banks' greed that fed the housing bubble with loony loans that were guaranteed to go bad. Of course the finance guys also made a fortune guaranteeing the loans that were guaranteed to go bad (ie AIG [4]), and when everything went bust, the taxpayers got handed the bill. The cost of the bailout will certainly be in the hundreds of billions, if not more than $1tn when it is all over.

More importantly, we are looking at the most severe economic downturn since the Great Depression. The cumulative lost output over the years 2008-2012 will almost certainly exceed $5tn. That comes to more than $60,000 for an average family of four. This is the price that we are paying for the bankers' greed, coupled with incredible incompetence and/or corruption from our regulators.