From a speech by Bill Duddley at the low-key world bankers gathering now underway in
It is critical that we ensure that no firm is too big to fail. This is about both fairness and having proper incentives in the financial system. Having some firms that are too big to fail creates moral hazard. These firms are able to obtain funding on more attractive terms because debt holders expect that the government will intervene rather than allow failure. In addition, too big to fail creates perverse incentives. In a too-big-to-fail regime, firms have an incentive to get large, not because it facilitates greater efficiency, but instead because the implicit government backstop enables the too-big-to-fail firm to achieve lower funding costs.So there's a revealing explanation of what "Too Big To Fail" really meant. The biggest banks, insurance and investment firms knew, from well in advance of the global financial crisis, that they could do whatever the fuck they wanted, and did, because the government would not let them crash into a heap. They'd already been assured of that. A long understood arrangement.
Where was the incentive to not act like greed-crazed reprobates?
They knew they could not die, and so acted as thought they thought themselves immortal.
What a scam.
Perhaps they really do dose the water in the US with psychoactive drugs, as Philip K Dick wrote back in the late 1960s. What other explanation can there be for the fact that most of those ultimately responsible for tens of millions of Americans eventually losing their homes not only escaped any kind of punishment at all, but are still getting bonuses?