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The Madoff Economy
Key Excerpts from Article on Website of New York Times
Posted: December 26th, 2008
http://www.nytimes.com/2008/12/19/opinion/19krugman.html?par...
The revelation that Bernard Madoff brilliant investor (or so almost everyone thought), philanthropist, pillar of the community was a phony has shocked the world, and understandably so. The scale of his alleged $50 billion Ponzi scheme is hard to comprehend. Yet ... how different, really, is Mr. Madoffs tale from the story of the investment industry as a whole? The financial services industry has claimed an ever-growing share of the nations income over the past generation, making the people who run the industry incredibly rich. Yet, at this point, it looks as if much of the industry has been destroying value, not creating it. And its not just a matter of money: the vast riches achieved by those who managed other peoples money have had a corrupting effect on our society as a whole. Last year, the average salary of employees in securities, commodity contracts, and investments was more than four times the average salary in the rest of the economy. Earning a million dollars was nothing special, and even incomes of $20 million or more were fairly common. The incomes of the richest Americans have exploded over the past generation, even as wages of ordinary workers have stagnated. High pay on Wall Street was a major cause of that divergence. Wall Street’s ill-gotten gains corrupted and continue to corrupt politics, in a nicely bipartisan way. From Bush administration officials ... who looked the other way as evidence of financial fraud mounted, to Democrats who still haven’t closed the outrageous tax loophole that benefits executives at hedge funds and private equity firms ... politicians have walked when money talked. The pay system on Wall Street lavishly rewards the appearance of profit, even if that appearance later turns out to have been an illusion.
Note: This entire, penetrating article is well worth a read at the link above. For many revealing reports from reliable sources on the realities of the Wall Street bailout, click here.
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