I've post many blogs describing the bizarre scene of elected politicians dancing to the tunes of a discredited banking sector. But what explains it? Billions spent by the financial services on lobbying politicians, certainly. Yet that's not really satisfactory as an explanation. There is pressure on politicians from lobbyists, but there's also countervailing pressure from the general public to get tough on the banks. And yet every time the politicians seem to end up doing what suits the managements of the banks.
There's plainly something deeper going on than raw special interest power. Simon Johnson, the former IMF economist, puts his finger on it in his testimony to Congress:
"The power of the financial sector goes far beyond a single set of people, a single administration, or a single political party. It is based not on a few personal connections, but on an ideology according to which the interests of Big Finance and the interests of the American people are naturally aligned – an ideology that assumes the private sector is always best, simply because it is the private sector, and hence the government should never tell the private sector what to do, but should only ask nicely, and maybe provide some financial handouts to keep the private sector alive."
For America, read Britain.