The meeting seemed to go well.  The world leaders fell all over themselves to get pictures with President Obama who was his usual cool self even though he didn’t get the Europeans to cough up  stimulus/recovery money of their own.  They seem to like the idea of regulations a lot more.  

 I wrote a piece a few weeks ago on the Gramm, Leach, Bliley Act as an example of degegluation that led to things like AIG.  I think the Europeans at the G-20 would like us to reinstitute some things like a version of the Gramm, Leach, Bliley Act.  Are the Administration and Congress really waiting to see the economy stabilize before the begin to write regs, or is it just a big stall hoping we will forget about it? 

Paul Krugman wrote an interesting op-ed yesterday in which he tied bankers/financiers salaries to bad stuff happening. 

Thirty-plus years ago, when I was a graduate student in economics, only the least ambitious of my classmates sought careers in the financial world. Even then, investment banks paid more than teaching or public service — but not that much more, and anyway, everyone knew that banking was, well, boring.

In the years that followed, of course, banking became anything but boring. Wheeling and dealing flourished, and pay scales in finance shot up, drawing in many of the nation’s best and brightest young people (O.K., I’m not so sure about the “best” part). And we were assured that our supersized financial sector was the key to prosperity.

Instead, however, finance turned into the monster that ate the world economy.

This is a cycle that began during the Great Depression

Before 1930, banking was an exciting industry featuring a number of larger-than-life figures, who built giant financial empires (some of which later turned out to have been based on fraud). This highflying finance sector presided over a rapid increase in debt: Household debt as a percentage of G.D.P. almost doubled between World War I and 1929.

During this first era of high finance, bankers were, on average, paid much more than their counterparts in other industries. But finance lost its glamour when the banking system collapsed during the Great Depression.

So now we have the heads of AIG, CitiBank (or whatever they call themselves now) saying they deserve their money and bonuses even though they contributed mightily to the current recession.  Even Larry Summers is fat and happy from feeding out of the financial trough.  Robert Sheer writes in The Nation

Not surprisingly, Lawrence Summers is convinced that he deserved every penny of the $8 million that Wall Street firms paid him last year. And why shouldn’t he be cut in on the loot from the loopholes in the toxic derivatives market that he pushed into law when he was Bill Clinton’s treasury secretary? No one has been more persistently effective in paving the way for the financial swindles that enriched the titans of finance while impoverishing the rest of the world than the man who is now the top economic adviser to President Obama.

It is especially disturbing that Summers got most of the $8 million from a major hedge fund at a time when such totally unregulated rich-guys-only investment clubs stand to make the most off the Obama administration’s plan for saving the banks. The scheme, as announced by Treasury Secretary Timothy Geithner, a Summers protégé, is to clean up the toxic holdings of the banks using taxpayer money and then turn them over to hedge funds that will risk little of their own capital. At least the banks are somewhat government-regulated, which cannot be said of the hedge funds, thanks to Summers.

 It was Summers, as much as anyone, who in the Clinton years prevented the regulation of the hedge funds that are at the center of the explosion of the derivatives bubble…

So do we have the makings of another crisis rather than a solution?  Here is Krugman again

The banking industry that emerged from that collapse was tightly regulated, far less colorful than it had been before the Depression, and far less lucrative for those who ran it. Banking became boring, partly because bankers were so conservative about lending: Household debt, which had fallen sharply as a percentage of G.D.P. during the Depression and World War II, stayed far below pre-1930s levels.

Strange to say, this era of boring banking was also an era of spectacular economic progress for most Americans.

The bottom line is we need to make banking boring again by regulating it so the Larry Summers of the world don’t get all the gain and the rest of us can do well also in our more modest way.

And finally, in case you missed it, is Paul Krugman on the Rachel Maddow show.