| >Does it seem to anyone else that the finance industry is increasingly distracted from actually matching up capital to fundamentally productive companies, especially new companies? This is somewhat controversial to posit, but I believe the corruption in the financial industry is extraordinarily entrenched because of the Fed. Before you call me a lunatic, smart and good people from Aaron Schwartz to Sanders have said things like this: that it should be eliminated, or that it is nothing more than socialism for the rich while hurting the poor. The most obvious problem with it is that it creates astronomical moral hazard by protecting and guaranteeing the big banks. After the Fin Crisis Krugman was talking a lot about making banking boring again, and run like utility companies. You can still have VCs, hedge funds, or whatever you want--but it's not funded by and guaranteed with anything other than the money you put in it, and it's separated from vanilla banking, ie Glass Steagall. But then we had Dodd Frank and sometime after Krugman never went back to talking about that again. Unfortunately, the dogma about the Fed is so entrenched in mainstream economics--so much so that speaking against it is immediately written-off. Nearly 1.5 centuries ago, all the banks were actually betting against Lincoln to lose his war. So he used the constitutionally-granted right to print the nation's own currency, and won the war with it. The point is, there's no reason we can't do this if we really wanted to (and if you care about poor and working class, and eliminating cronyism from the world, you should want to). |
Allowing banks to merge and become huge conglomerates, the elimination of Glass-Stegal (which eliminated the distinction between normal banks and investment banks), and lax regulation of derivatives / dark money are all very direct causes.