Sunday, October 18, 2009
Washington’s response to the economic crisis that began last year has done little to help the average American get going again, but it has helped some of Wall Street’s most powerful institutions become stronger than ever. Reducing interest rates to near zero has not loosened lending to allow small businesses to thrive, but it has helped Goldman Sachs and JPMorgan Chase finance their high-risk trading, which has yielded big returns this year. These banks are also benefiting from fewer or weaker competitors who aren’t in a position to challenge these revitalized behemoths.
Because Goldman Sachs and Morgan Stanley were allowed to reinvent themselves as bank holding companies, they were able to borrow money cheaply and issue bonds, guaranteed by the Federal Deposit Insurance Corporation, worth tens of billions of dollars.
“All of this is facilitated by the Federal Reserve and the government, who really want financial institutions to get back to lending,” Gary Richardson, a research fellow at the National Bureau of Economic Research, told The New York Times. “But we have just shown them that they can have the most frightening things happen to them, and we will throw trillions of dollars to protect them.”
-Noel Brinkerhoff
Bailout Helps Fuel a New Era of Wall Street Wealth (by Graham Bowley, New York Times)
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