The New York Review of Books

Nelson Ching/Bloomberg Images

William Rhodes, senior vice-chairman of Citigroup, with Josef Ackermann, chairman of Deutsche Bank, at the Institute of International Finance spring membership meeting, Beijing, June 2009

The banksters, as some people have taken to calling them, have had a mixed run lately.¹ Just a year or two ago, at the height of the financial crisis and during its immediate aftermath, most Americans were acutely aware of the damage done to our financial system and our economy by lax lending standards at many of our major financial institutions and their parallel willingness to take what amounted to one-sided gambles with other people’s money. There was as well the personal cost inflicted on millions of families, as borrowers went bankrupt or owed more on their mortgages than their homes were then worth.

Congress, with the encouragement of President Obama, was writing new legislation to restrain the most dangerous excesses and limit the damage should another such system-wide disaster threaten in the future. The huge sums paid out to top-level executives, often regardless of whether their institutions prospered—in some cases, even whether they survived—only intensified the opprobrium. In short, bankers were in bad odor.

Memories are short. Today many of the country’s largest financial institutions are eagerly engaging again in the kinds of risk-taking activities that put them in trouble just a few years ago, among them the use of highly risky loans and derivatives. With a very few isolated exceptions, the worst individual offenders have escaped prosecution. Most executives have retained all, or at least the greater part, of the outsized compensation they received for leading their institutions to ruin. (Angelo Mozilo, former CEO of Countrywide Financial, the nation’s largest mortgage lender, faced civil fraud charges for misleading investors about the risks involved in subprime lending; the charges stuck, and so he was allowed to keep “only” $454 million of the $521.5 million that he made between 2000 and 2008.)

The economy’s turnaround, together with continuing near-zero interest rates for most kinds of deposits, has boosted the profits of lenders who can take advantage of such cheap money. The resulting (very partial) recovery in the stock prices of banks that would have failed in the crisis except for government assistance has become an occasion for a new round of large salaries and bonuses. Shareowners in Bank of America, for example, saw their stock fall from $55 per share to $2.50; with the recent increase to $13, the firm set CEO Brian Moynihan’s 2010 pay package at $10 million.

More important for the future, the country’s largest financial institutions and their leaders have regained sufficient confidence that they are again seeking to resist or undermine restrictions on their activities. The Dodd-Frank Wall Street Reform and Consumer Protection Act, which Congress passed last July, imposed several significant changes (some for the better, some not) on how US financial firms do business and how they are regulated. But the new legislation …