Jim Young / Courtesy Reuters

Why Banking Systems Succeed -- And Fail

The Politics Behind Financial Institutions

People routinely blame politics for outcomes they don’t like, often with good reason: when the dolt in the cubicle down the hall gets a promotion because he plays golf with the boss, when a powerful senator delivers pork-barrel spending to his home state, when a well-connected entrepreneur obtains millions of dollars in government subsidies to build factories that will probably never become competitive enterprises. Yet conventional wisdom holds that politics is not at fault when it comes to banking crises and that such crises instead result from unforeseen and extraordinary circumstances. In the wake of banking meltdowns, one can rely …

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