Middle Class Pays for Banks' Mistakes

Simon Johnson, BloombergAt one level, all financial crises are the same. A relatively small group of people, typically bankers, find the opportunity to take very big risks. For a while, financiers show high profits, justifying rising stock prices for their companies and large bonuses for their top executives. But these profits are never properly adjusted for what will actually materialize over five to 10 years, meaning that they understate risk and overstate true earnings.Greater short-term returns are often available if you take more risk; just look at the Icelandic banking system after 2003. Three banks were...

Leila Arcieri Lena Headey Leonor Varela