THE WINDS OF CHANGE ★^1133corporate and other taxes), received $5.7 billion in bonuses in 2007 and 2008.
In 2010, Goldman Sachs, the Wall Street banking and investment firm, paid a
fine of half a billion dollars to settle charges that it had knowingly marketed to
clients mortgage- based securities it knew were bound to fail, and then in effect
bet on their failure. (This was like a real- estate agency selling an unsuspecting
customer a house with faulty wiring and then taking out insurance so that the
agency would be paid when the house burned down.)
Overall, during the next few years, an incredible litany of malfeasance by
the world’s largest banks became public. Between 2009 and 2015, major banks,
American and foreign, were forced by their respective governments to pay fines
totaling in excess of $100 billion for such actions as facilitating tax evasion by
wealthy clients, fixing foreign currency exchange rates and international inter-
est rates to boost their own profits, often at the expense of their customers, and
misleading regulators about their activities. Yet bank profits are so large that
the institutions accepted these fines as simply a minor cost of doing business.
Even when J. P. Morgan Chase and Citibank pleaded guilty to felony conspir-
acy charges, no meaningful punishment followed. No individual executive was
charged with a crime, and the Securities and Exchange Commission granted
waivers from penalties that are supposed to punish criminal behavior, such as
being barred from certain kinds of financial transactions.
It was also revealed that Bernard Madoff, a Wall Street investor who claimed
to have made enormous profits for his clients, had in fact run a Ponzi scheme
in which investors who wanted to retrieve their money were paid with funds
from new participants. Madoff sent fictitious monthly financial statements
to his clients but he never actually made stock purchases for them. When the
scheme collapsed, Madoff ’s investors suffered losses amounting to around
$50 billion. In 2009, Madoff pleaded guilty to fraud and was sentenced to 150
years in prison. In some ways, Madoff ’s scheme was a metaphor for the Amer-
ican economy at large over the previous decade. Its growth had been based on
borrowing from others and spending money people did not have. The popular
musical group Coldplay related what had happened:
I used to rule the world....
I discovered that my castles stand
On pillars of salt and pillars of sand.The Collapse of Market Fundamentalism
The crisis exposed the dark side of market fundamentalism— the ethos of dereg-
ulation that had dominated world affairs for the preceding thirty years. Alan
Greenspan, the head of the Federal Reserve Bank from 1987 to 2006, had steered
What events eroded support for President Bush’s policies during his second term?