A nation borrowing its way toward financial insolvency is not staging an economic recovery even when GDP picks up and the stock market rises. Some people talk about the “recovery of growth” like it is the ultimate goal of American life. What is this recovery that we supposedly need? It is nothing but debt facilitated GDP growth and asset inflation to create a built-in reward for leveraged mega-investors. That’s how Wall Street banks “create” the money to pay big bonuses.
In 2009 the leading issue of moral hazard was “too big to fail.” Not surprisingly, the more things change, the more they stay the same. As the congressional bank hearings of 2010 unfold, the new touchstone of moral hazard is “too big to discipline.” The heads of Morgan Stanley, J.P Morgan and Bank of America argue that they cannot be reproved in practice or disciplined by being broken up because their gargantuan size is necessary for the health of American banking in a global environment. ‘Make us pay, and you’ll pay,’ is their mantra!