Megabanks: Too Big to Save
It was an unusual moment at the 2011 Oscars. Charles Ferguson, director of the award-winning documentary “Inside Job,” told the audience, “Forgive me, I must start by pointing out that three years after our horrific financial crisis caused by financial fraud, not a single financial executive has gone to jail, and that’s wrong.” There was some applause. Imagine if you or I drove away without paying for gas or stole a pizza. We’d be arrested. But if you commit a huge financial fraud you walk away with tons of money. The robber barons of the age are laughing as hapless citizens watch in dismay as they are taken to the cleaners. Are these the values U.S. politicians keep extolling and insist the world emulate? Why were these banks and their executives not punished? The lesson to be drawn? Crime pays.
Simon Johnson teaches at the Sloan School of Management at MIT. He is also a senior fellow at the Peterson Institute for International Economics in Washington, D.C., and a member of the Congressional Budget Office’s Panel of Economic Advisers. He is a well known commentator and writer on financial affairs and co-author of 13 Bankers.