Pinkerton: How the Rich Got Woke, Went Broke, But *Still* Got Richer

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The Quiet Coup Part II

In 2009, the year after the great financial crisis, Simon Johnson published a memorable piece in The Atlantic, entitled “The Quiet Coup.” Johnson, a former chief economist of the International Monetary Fund, described the scandalous process by which financiers “played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse.”

These words might seem familiar today, as we ponder a new scandal: the open-ended bailouts of depositors at Silicon Valley Bank (SVB) and Signature Bank, which former Treasury Secretary Larry Summers suggests has already cost each American adult $100 and counting, making it a tax increase by a different name. And, of course, we’re all still worrying about the next bank(s) to drop.

In his essay, Johnson noted that in the 1970s and 1980s, the U.S. financial sector never gained more than 16 percent of domestic corporate profits. But then, thanks to deregulation and deindustrialization — with banks often playing arbitrageur, helping to move factories and other assets offshore — finance profits started rising as a share of the total. In the decade of the 2000s, they reached a whopping 41 percent, meaning that more than two-fifths of American profits for anything were in finance. That money-surge paid for a lot of rich blue dots, for greater Democratic political power, and, of course, for plenty of wokeness. For his part, Johnson zeroed in on telling details:

Stanley O’Neal, the CEO of Merrill Lynch, pushed his firm heavily into the mortgage-backed-securities market at its peak in 2005 and 2006 … O’Neal took home a $14 million bonus in 2006; in 2007, he walked away from Merrill with a severance package worth $162 million.

The ultimate problem with the banks and finance houses, Johnson concluded, was their gargantuan scale: “Oversize institutions disproportionately influence public policy; the major banks we have today draw much of their power from being too big to fail.”


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