Simon Johnson is the co-author of 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown, which we wrote about here. This week, Russ Roberts interviews Johnson on EconTalk, and a summary of the interview. Here’s a taste:
On Regulatory Capture: Prof. Johnson says he is a follower of George Stigler, who made the point that when you regulate industry, industry will attempt to capture the regulators. Bankers are able to capture the regulation and get themselves huge commissions to take on risk. We witnessed one of the most sophisticated episodes of regulatory capture in the history of humankind.
On who benefitted: The benefit of this kind of rent-seeking accrues to executives in the bank – and not to shareholders.
Interesting point, that we also brought up here.