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Kristof on crony capitalism

Nicholas Kristof in the New York Times:

Capitalism is so successful an economic system partly because of an internal discipline that allows for loss and even bankruptcy. It’s the possibility of failure that creates the opportunity for triumph. Yet many of America’s major banks are too big to fail, so they can privatize profits while socializing risk.

The upshot is that financial institutions boost leverage in search of supersize profits and bonuses. Banks pretend that risk is eliminated because it’s securitized. Rating agencies accept money to issue an imprimatur that turns out to be meaningless. The system teeters, and then the taxpayer rushes in to bail bankers out. Where’s the accountability?

Almost all of the column is superb. Read it. Then go read the comments. Most commenters don’t seem to understand the distinction between wealth that is created by making the pie bigger and wealth that is taken from others merely rearranging the slices of the pie. Not the same thing.

When the next bailouts of creditors are demanded as necessary to help save Main Street, I hope Nicholas Kristof will speak out against them.