RECOVERING FROM THE DEIFICATION OF MARKETS

An article in The Atlantic on the Cult of Finance is now popular, The Quiet Coup, which is similar to the book, Bailout Nation. From the confluence of campaign finance, personal connections, and ideology there flowed in the past decade a river of deregulatory policies that was the idolatrous deification of markets:

• insistence on free movement of capital across borders;

• the repeal of Depression-era regulations separating commercial and investment banking;

• a congressional ban on the regulation of credit-default swaps;

• major increases in the amount of leverage allowed to investment banks;

• a light or invisible hand at the Securities and Exchange Commission in its regulatory enforcement;

• an international agreement to allow banks to measure their own riskiness;

• and an intentional failure to update regulations so as to keep up with the tremendous pace of financial innovation.

The mood that accompanied these measures in Washington seemed to swing between nonchalance and estactic celebration: finance unleashed and fed, it was thought, would propel the economy to ever greater heights...
The Big Picture