Nicholas Kristof: Circumvention
on Sunday, October 23, 2011Nicholas Kristof Money Quotation saying financial institutions are finding ways to circumvent the free market, but only when it benefits capital creation. Nicholas Kristof said:
“The banks have gotten away with privatizing profits and socializing risks, and that’s just another form of bank robbery” — Nicholas Kristof
The quote “The banks have gotten away with privatizing profits and socializing risks, and that’s just another form of bank robbery” by Nicholas Kristof is criticizing the common practice of large financial institutions reaping massive rewards during economic booms by taking on debt and risky bets, but then offloading potential losses onto taxpayers when those gambles go bust through government bailouts.
Kristof argues this amounts to a transfer of wealth from the public to the banks, since taxpayers are on the hook for covering losses that benefit private shareholders and executives when risks materialize into crisis.
By “privatizing profits” yet having governments “socialize” or share the costs of failures, banks get to keep profits while the public shoulders the downside burden according to Kristof. He portrays this as an unfair system that enriches banks at the expense of citizens, making it a kind of “bank robbery” of public funds.