The crisis, the bailout and financial reform

“Never waste a crisis.” Those words were often invoked by reformers who wanted to tighten regulations and financial supervision in the aftermath of the Global Financial Crisis (GFC) that began in late 2007. ³ Many of them have been disappointed because the relatively weak reforms adopted (for example in Dodd–Frank) appear to have fallen far short of what is needed. But the same words can be and should have been invoked in reference to the policy response to the crisis—that is, to the rescue of the financial system. To date, the crisis was also wasted in that area, too. If anything, the crisis response largely restored the financial system that existed in 2007 on the eve of the crisis. Risky practices are already returning. The economic system is still burdened with excessive “financialization,” with “Wall Street” sucking economic rents from the economy, hindering recovery.