DELONG: Finance, business models and regulation

The "business model" of many financial institutions had more in common with high stakes gambling, pyramid schemes and loan sharking than with legitimate business. The tip of the iceberg was visible for years in the activities of major banks: trapping customers into unmanageable credit card debts with teaser rates and piling on exorbitant interest rates and late fees with the first missed payment; lending money to poor credit risks with a high probability of default; making loans at zero percent interest with the intention of repossessing the collateral assets. We can move on from there to bogus appraisals of real estate, securities that were impossible to value and Congressmen on the take. All of this went on under the noses of lawmakers, regulators and the "watchdog" media and the taxpayer will end up paying the bill for stupidity and corruption.