Tuesday, February 10, 2009

Is it time to call investment bankers oligarchs?

Yes although I don't really see Geithner as anti-oligarch.

Update: A longer article is in the May 2009 issue of Atlantic.

The great wealth that the financial sector created and concentrated gave bankers enormous political weight—a weight not seen in the U.S. since the era of J.P. Morgan (the man). In that period, the banking panic of 1907 could be stopped only by coordination among private-sector bankers: no government entity was able to offer an effective response. But that first age of banking oligarchs came to an end with the passage of significant banking regulation in response to the Great Depression; the reemergence of an American financial oligarchy is quite recent.

A failure of economics models is that they ignore the evolution of firms - as firms become bigger and more powerful they curry favor with politicians in order to become even bigger. (See here for an example.) Or they start small but use any political influence they can to become big.

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