The special inspector general for TARP (the Troubled Asset Relief Program) reported on July 21 that the bank bailout that has been going on since September 2008 has cost $3.7 trillion in actual expenditures and guarantees to the banks. Not surprisingly, the banks are prospering. But in a just world, the failed banks would have been shut.
Of course, the impact of the financial crisis goes far beyond that—wiping out jobs, wealth, and optimism. The Economist calls it America’s “sharpest trauma since the second world war.” Yet no one has been held accountable.
On July 21, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act. “Because of this law,” he declared, “the American people will never again be asked to foot the bill for Wall Street’s mistakes. There will be no more taxpayer funded bailouts. Period.” Obama praised the work of the broadly smiling Sen. Chris Dodd (D-CT) and Rep. Barney Frank (D-MA), then led a long applause.
Everyone knows that, if Goldman Sachs fails tomorrow, the government will bail it out. In fact, the financial-reform law does not seriously address the issues raised by the Crisis of 2008. Rather than diminishing the big banks’ power, the new law enhances it, institutionalizing Too Big To Fail. TBTF, the heart of the current crisis, allows...