Simon Johnson

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Big Business

No Joke: 'Big Banks Are Blackmailing the Country'

By Team at April 1, 2010 - 2:08pm

Wall Street's on the rebound and now they feel invincible. That's dangerous for the country. Yahoo Finance reports:

Treasury Secretary Timothy Geithner says "it's not fair. It's deeply unfair," that Wall Street has recovered so strongly from the financial crisis while millions of Americans are still struggling.

As we all know, when America’s banking system nearly imploded in 2008, our entire economy was nearly destroyed. Eight million jobs were lost, trillions of dollars in personal wealth evaporated, and bailouts turned our growing deficit into a black hole we may never be able to escape.

Simon Johnson, professor at MIT’s Sloan School of Business and author of 13 Bankers, says it's not only unfair, but that the bailouts Geithner and others engineered for the nation's biggest banks are dangerous. "They (the banks) really feel they're completely invulnerable," he tells Aaron and Henry in the accompanying clip. The prevailing thought on Wall Street is, "if things go badly it’s not your problem," he says....

The cost of the bailouts are far greater than TARP.

Johnson, who is also a member of the CBO’s Panel of Economic Advisers, estimates the debt-to-GDP levels have gone from 40% pre-crisis to 80% post-crisis. "We've doubled our government debt for what?,” he asks. “Because the financial sector screwed up in such a massive, enormous and stupid way."

So, should we continue doing nothing and letting Wall Street run amuck? Or, should we introduce tough new rules to protect Main Street from another Wall Street screw up? You decide.