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Simon Johnson

Incompetence is no reason to lose your job (if you have the right friends)

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To be sure, we have changed our financial system over the past few years — but we only thinned it out at the top, creating more market power and greater opportunities for risk-taking by global megabanks that have now completed the process of political capture (so they have little to fear from regulators). We have also removed the consequences for bankers from financial failure — now board members, top executives and leading traders get to keep their jobs, their salaries, their bonuses and their pensions, even when they drive their firms off the cliff. Moral hazard naturally predominates.

The 18-month recession of from 2007 to 2009 is a wake-up call. Greater disaster awaits — unless and until we reduce the political power of Big Finance.

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