To say the decision to save the banks was terrible is to understate how profoundly awful the decision was.

The first casualty of this decision was capitalism based on the US model.   It was the US after World War II that exported a global financial system based on transparency.  Everyone knew in exchange for the information needed to assess the risk/return of an investment, the investor was responsible for all losses on their investment exposures.  Capitalism as it had been practice for seven decades ended when the Committee to Save the Banks (Hank Paulson, Ben Bernanke and Tim Geithner) decided the opaque banks should be saved.

Gone was the responsibility for losses.  Instead of the banks recognizing their losses on debt the borrower could never repay, the losses were socialized.

Gone was jail for rigging financial markets.  Instead of bankers going to jail for rigging markets ranging from interest rates like LIBOR (often referred to as the price of money) to commodities, governments adopted the idea of Too Big to Jail and let the bankers continue to engage in misbehavior.

The second casualty of this decision was democracy.  Government no longer worked for the citizens.  Rather, it worked for the bankers and the 1%.  This wasn’t missed.  In the US, voters first cast their ballots for “Hope and Change”.  The hope being there would be a change in policy and it would be the citizens and not bankers government worked for.  When this didn’t occur, voters cast their ballots for populism under the slogan of “Make America Great Again”.  Unfortunately, this has resulted in the government working even harder for the 1% at the expense of the citizens.

Of course, the decision to save the banks was unnecessary.  By design, the US wasn’t in danger of a second Great Depression.  While the banks were (and likely still are) insolvent, the combination of deposit insurance and the lender of last resort meant the banks could continue operating indefinitely until the government chose to close them.

This design would have allowed the write down of the debt that would never be repaid.  This design would have allowed the prosecution of bankers who broke the law.

Had both of these happened, voters would have no reason to elect an individual intent on “breaking” the US led world order.  He is simply finishing the job begun by the Committee to Save the Banks.

The Guardian’s Larry Elliott provided a nice summary:

In contrast to the left in 2008, Franklin D Roosevelt in the 1930s relished having a fight with the big battalions of Wall Street. He stuck up for the little guy and made life easier for trade unions. He didn’t say that there was no real alternative to global financial capitalism and that those who didn’t like it would have to suck it up. America eschewed populism during the Great Depression, even though the economic pain caused by the slump was far more severe than that suffered after the financial crisis of a decade ago, because it had a progressive in the White House who said the only thing to fear was fear itself.

But that was then. The way of doing business for the old left was to identify a problem, come up with a solution and try it out. If the idea flopped, the answer was not to offer voters more of the same; rather it was to try something else….

The months that followed the collapse of Lehman Brothers in September 2008 was a winter of discontent for capital… Parties of the centre-left had the opportunity to put finance back in its cage – the way Roosevelt did in the 1930s – but flunked it.

Revulsion at the activities of the bankers meant there was a thirst for change, but the change never happened.

There was a political vacuum filled by rightwing ideas: