Reply #84: MIT professor Simon Johnson to Obama: You still don't get it

[depakid]

This is the antithesis of a free-market system. Not only were their banks saved by government action in 2008-09 but the overly generous nature of this bailout (details here) means that the playing field is now massively tilted in favor of these banks. (I put this to Gerry Corrigan of Goldman and Barry Zubrow of JP Morgan when we appeared before the Senate Banking Committee last week; there was no effective rejoinder.)

Not only that, but the incentives for the people running these megabanks is now to take on reckless amounts of risk. They get the upside (for example, in these compensation packages) and -- when the downside materializes -- this belongs to taxpayers and everyone who loses a job. (See my testimony to the Senate Budget Committee yesterday; there was no disagreement among the witnesses or even across the aisle between Senators on this point.)

Being nice to the biggest banks will not save the midterm elections for the Democrats. The banks' campaign contributions will flow increasingly to the Republicans and against any Democrats (and there are precious few) who have fought for real reform.

More: http://www.commondreams.org/view/2010/02/10-10