You may not have noticed amidst the continued, public grumbling of its leaders, but Wall Street, indisputably, is back. The flow of complaints from Wall Street executives that post-crisis reregulation has hurt their moneymaking prospects has not abated, but the flow of money itself has long since resumed. In fact, the big banks that survived the events of 2008 have entered a new golden age. As incredible as it may seem, this new age is marked not just by the immense profits and hefty bonuses common to prior times of plenty, but also, because of the sheer size of the banks, by an increase in the power that Wall Street wields in local, state, and national politics.
A quick refresher: In the weeks and months following the bankruptcy of Lehman Brothers, in September 2008—and also following the near-collapses of Merrill Lynch, Morgan Stanley, and Wachovia; the meltdown of Washington Mutual; and the massive bailouts of AIG and Citigroup—there seemed to be a consensus that the basic architecture of the financial industry was deeply flawed and in need of a redesign. Wall Street was both morally and literally bankrupt. If ever a system cried out for reform, this was it. Wall Street’s reliance on short-term financing, leaving it insolvent the moment overnight lenders grew fearful of its prospects, needed a reboot, as did Wall Street’s compensation system, which rewarded bankers, traders, and executives for taking big risks with other people’s money.