Three books, three different views on the financial crisis. But what is clear is that changing the system will take time—and that our best hope is simplicityby Jonathan Ford / April 26, 2010 / Leave a comment
Published in May 2010 issue of Prospect Magazine
Some of the 13 bankers who asked Obama for help: where are they all now?
by Simon Johnson and James Kwak (Pantheon, £17.48)
The Big Short
by Michael Lewis (Allen Lane, £25)
by John Lanchester (Allen Lane, £20)
In March 2009, 13 bankers went to the White House to ask President Obama for help. Among them were the chief executives of America’s biggest financial firms: Citigroup, Goldman Sachs, Bank of America and Morgan Stanley. The banking system was still in crisis, the shares of many institutions were at dangerous lows. The bankers got what they wanted. Obama, new to the job, did what was needed to restore confidence. In return he hoped that the bankers would not pay fat bonuses and would support his plans to overhaul financial regulation. The message that came out of the meeting was clear. As the bankers stood on the White House steps, they repeated the same mantra: “We’re all in this together.”
Fast forward six months to New York, and a major speech in which the president called on Wall Street to support regulatory reforms on banks. Not a single banker showed up. This story, related by Simon Johnson and James Kwak in 13 Bankers, encapsulates the crisis. It’s been take, take, take by the bankers—without them giving anything much in return. Just look at the balance sheet. Despite a deep recession and huge budget deficits, Washington has helped the banks out mightily since the crisis broke in 2007. They have received injections of capital and state guarantees for their debts. At the same time, the crunch has thinned the competition.
And what’s on the other side? The banks have barely cut their enormous bonus cheques, prompting Obama to dub them as irresponsible and, in Britain, the head of the CBI to talk of top executives, including bankers, as “aliens.” The name-calling is worrying; it looks weak. Meanwhile, the “aliens” have lobbied hard against any restrictions on their business. Far from all being in it together, the banks sometimes give the impression that they feel they have the upper hand. And perhaps they do. After all, having helped them survive the crisis, the politicians now need their acquiescence to secure the recovery.