I do think it is essential, if you want to have a functional world view, to understand the nature of the changes that have occurred in the banking industry...
You don't need a fine toothed comb run through the details of the manipulations of the law and the parallel changes in the rules to understand it... if you understand that the ETHIC of banking was altered dramatically,along with everything else that was changed, as a part of the repeal of Glass-Steagal.
The entire industry now operates on the premise that bankers make good by succeeding more in efforts that work in taking more from others... The art of the "take down" is the new organizing principle.
The theory of a functional free market... depends on markets sustaining honesty.
The theory of modern banking... depends for success on succeeding in the sustaining the opposite.
In the free market concept... lending is undertaken with the intent of enabling the success of those who borrow, so lenders succeed as borrowers succeed. In the concept we have now... lending is undertaken intending to enable the failure of those who borrow, so that lenders can take everything from them... not just winning the advertised return on investment they pretend is the reward they are seeking for the risk taken.
When you steal everything from everyone that you can, that does work to produce outsize returns, for as long as you can sustain the effort... but, the effort is self limiting. The effort proceeds at the cost of eroding trust, undermining the free market, and the base of value in the expectation of fair dealing that the existence of a free market depends upon. A free market existing depends upon an absence of fraud. The longer you sustain the operation of a market based in fraud... the more the free market function is hollowed out.. the less people will be willing to choose to play the game... the less the benefits of having a free market will accrue... as your choices snuff the free market out.
Same thing said another way... is that banks can succeed more, for a time, by imposing larger transfers in the percentage of the pie to the banks than have historically been tenable. Rejigger the rules to alter the %'s paid to banks for the same services (only, obviously, with those services being much less valuable given the change in their intent)... and, over time, the banks will gain a larger share of the pie than they had before... as has been happening.
But, over time, two other things occur.
One is that the market responds to that imposition of error in banksters frauds not only by refusing to borrow... but by refusing to participate at all... and the pie begins to slow its rate of growth, first... and, then, it begins to shrink rather than grow, as people opt out of participation, with the shift in risks versus rewards... with the banks still thinking that's OK, as long as they are taking in more of the pie for themselves at a rate that exceeds the pace at which the pie shrinks...
The other is that as the banks run out of patsies to steal from... they're forced into a competition that boils down to cannibalizing themselves...
The events of 2008 revealed both occurring... apparently with the banks genuinely not recognizing until that point the nature of the situation they'd created, which they were forced to recognize, along with the reality of the implications, in the melt down. Things froze up because banks suddenly realized that all the other banks were run by crooks too... and they couldn't be trusted to be honest, or to make good on their promises.
We had an opportunity in 2008 to fix the banks... by putting the crooks in jail.
What we did instead was to have taxpayers directly subsidize the criminals to insulate them from the consequences of their choices... while doing nothing to change any of the underlying errors.
And, as a result, now we are rapidly approaching that tipping point where the fact of shrinkage in the pie is being recognized, and where that process of shrinkage begins to accelerate with the growing recognition...
That's my nutshell version of where we are, and how we got here, and what's likely to happen next... shouldn't be that hard to glean from the situation seen in that context ?
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