What Caused the Current Economic Crisis, Really?

According to an excellent series that has just appeared in the online magazine Salon, it was a "vast criminal enterprise."

The three-part series is based on an "e-mail conversation" held last month and this between John R. Talbott, a former Goldman Sachs investor banker, and Simon Johnson, former chief economist of the International Monetary Fund. Published over the last three days, part one is here; part two is here; and part three is here.

Each exchange is quite lengthy, and quite dense, and absolutely worth careful reading.

Johnson is marginally more optimistic than Talbott that the Obama Administration can effect real change -- and bring the real criminals (by which they mean corporate control of American elected officials, major and minor, through campaign contributions and industry-level lobbying, not just individuals like Bernie Madoff) to justice.

Real reform, they urge, is what's needed, not minor regulatory tweaks. Talbott insists that "we need to find a way to get corporations out of our government and ensure that they never become either too big to fail or so big that they improperly influence markets and our government." Johnson suggests that one solution might be what he terms a "'tax' (speaking loosely) on size in finance. There is a growing consensus that if you are big enough to jeopardize the financial system and to require a future bailout, you should pay for that privilege."

I still find it hard to understand how the prior Republican administrations could speak out of one side of their mouths about Adam Smith's "invisible hand" and how markets could "police" themselves better than any government regulator, and on the other side mouth Christian pieties. If you are a Christian -- as Adam Smith most definitely was -- you care deeply about the morality of behavior, and you believe deeply in the fallenness of man. To expect people driven by greed and unrestrained by threat of legal action to behave ethically is incomprehensibly naive... or wait: Could it be that one of those two sides was lying???? Oh, surely not....