Am I misunderstanding something, or have the US banks stolen $1.5 trillion in US tax money in the past month or two? It's not the first time this has happened, either. They kept on deregulating away, and now we get to hear how the bailouts will save the economy.
Despite what it may appear from the headlines, you are indeed mistaken.
Theft is not what you are seeing.
Greed and fear are what markets are built on, it's what they assume as normal human behaviour and what drives the benefits that result from them.
It's a testament to the idea of markets that they can harvest the human negatives and make them into societal positives and massive generators of taxed income for the citizens of the country.
And, just like the justice system, when greed and fear lead people to try to circumvent the underlying agreement that allows markets to function, it's the job of the governments to protect the integrity of the markets and protect the tax income resulting from the markets, by locating and punishing anyone who would circumvent the rules they operate by.
And it's always been a balancing act, between the freedom to take risks and pursue new opportunities and restrictions that limit the damages when markets make mistakes.
The 1.5 trillion results from a mix of things.
Part of it is punishment for the people and their government allowing the balance to drift too far towards freedom and risk taking, at the expense of an amplified downside.
Part of it is the shattering of an illusion, much of the profits and tax income of the last few years simply weren't real, they only existed on paper and the government should never have gotten it in the first place. They are giving back money they never really deserved.
And part of it is a somewhat typical result of the leap into a new level of more complex and sophisticated financial instruments.
When mass insurance first appeared, the first generation of big insurance companies crashed and burned spectacularly, because nobody had correctly predicted the volume of increase in riskier behaviour, now that people weren't responsible for their losses. Time was needed for governments and markets to adapt to the new complexity.
Sure, greed is a factor. But it is a known and constant one.
The greed of ordinary people to buy and live in a house they couldn't afford, because if things went wrong they could walk away. The greed of bankers to make big fat bonus checks turning over so many new deals. None of this is unusual.
And nor is the money necessarily wasted. In past times, money loaned to rescue companies (like to the car industry), or used to buy them out (like with previous banks) have been fully returned to the government, often with healthy or even massive profits.
The $50 billion dollars spent by the UK government to rescue the bank of Scotland, a generally good bank that nobody else could save, will probably make the British people a lot of money.
The AIG insurance group was very healthy, except for the relative new cancerous growth in the corner that insured against company failures, and which brought the whole thing down. The US will gradually sell off the good bits and pull most, all, or even more than the $80 billion back.
Meanwhile, the investors and stockholders will lose everything. It will cost them FAR more than it costs the governments.
But don't worry too much about the $1.5 trillion, even the US doesn't just piss that much into the wind. Some of it will be lost as punishment, some will evaporate as non-real, and some will quite likely make you back a lot of money.
No single thing is responsible, many things combined together amplified the US problem into what it became. But don't blame greed, it's too easy.
