Wall Street: Same As It Ever Was But Worse

The warning signs were there. In the decades before the financial world fell apart in 2008, what had been a great many small and diverse intermediaries merged and grew into a few global powerhouses. The new behemoths of finance were generally far too big to manage: with their trillion-dollar balance sheets and cellars full of assets that no one understood, they were a disaster waiting to happen.

These institutions were, literally, too big to fail. Lehman Brothers was one of the smallest, and its bankruptcy forced governments around the world to carry out formerly unthinkable emergency actions just to keep the global economy from completely collapsing. The cost of the bailout ran into the trillions, and unemployment rose as high as 10.1 percent; we can probably never recover fully from the crisis. The ingredients that spelled disaster were simple: bigness, interconnectedness, and profitability.