Was the American financial system looted?
The New York Times raises this in a compelling discussion of a 16-year-old study that, essentially, followed the 1980s S&L and real estate crash. Writes David Leonhardt in a contemporary application of a suddenly very important economic research paper:
… when I spoke with Mr. Romer (a co-author of the study) on Tuesday, he was careful to make a distinction between classic moral hazard and looting. It’s an important distinction.With moral hazard, bankers are making real wagers. If those wagers pay off, the government has no role in the transaction. With looting, the government’s involvement is crucial to the whole enterprise.
The article is compelling and is a must read if you wish to separate out all the partisan bs about who’s to blame.
“Looting” takes on deeper meaning in tandem with the word “clawback” and recovery of the personal and misbegotten profits of the people involved.