When I was younger there were many regulations in place which stopped banks from growing too large. Over the past decades, these regulations have been washed away and banks took the opportunity to acquire their way to becoming ever larger. Some of these organizations grew organically but it was the regulations which changed, allowing this growth to take place without limits.
Eventually we ended up with a system of banks and insurance companies which were such a large part of financial markets that they had too many hooks in everything to be allowed to go under.
Capitalism is not perfect but it gives incentives for all to do better.
What we have now is the exact opposite. The majority of bankers - especially the ones who took home billions in bonuses took extreme risk and bankrupted their industry and much of the world with them. Various governments stepped in to save the system and in doing so perverted capitalism.
Saving incompetent bankers and insurers from failure is the exact opposite of capitalism.
What is most shocking to me is that 5% of the US workforce has lost jobs due to the banking/insurance problems of the past half-decade and now, many of the bankers are back to getting their massive bonuses - in the billions.
These are the same bankers who would be out of work if it wasn't for the tax dollars of the people they put out of work!
The injustice is staggering and the system has indeed been royally screwed up.
Having said that, it seems in hindsight like much of what was done to bail out these firms had to be done.
This leads me to the next point which is too big to fail must go away as of today.
Let's stop the practice of bailing out the most incompetent people at the expense of the little guy who is working hard and managing his finances effectively.
Here is more on the matter from Odysseas Papadimitriou.
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