In September 2008, I observed saving the existing banks was completely unnecessary.

Why?

One of the important roles the banks play in the financial system is to absorb losses and protect the real economy from a financial crisis.

I also observed the cost of saving the banks was going to be much higher than the Committee to Save the Banks was publicly disclosing.

A confession.  In 2008, I was only thinking about the economic cost of saving the banks and pushing the burden of the excess debt in the financial system onto the real economy.

I completely missed the political dimension of what happens when you force borrowers to repay debt they do not have the ability to repay.  What happens is the conditions for the rise of Populism are created.

A decade has passed since the Committee to Save the Banks’ (Paulson, Bernanke and Geithner) fundamentally flawed decision as to how to respond to the financial crisis.  A decision best summarized in the lyrics to the Titanic folk song:

the rich refused to associate with the poor, so they put them down below where they’d be the first to go.

While I make no claim to being a political scientist, it is impossible to miss the strong correlation between bailing out the banks and the rise of populism.  Where the banks were “saved”, populism has become a powerful political force.  This is true in the EU, UK and US.  Where the banks were not “saved”, populism has not gained a foothold.  This is true in Iceland.