From Michael Hudson, in an Athens News interview posted on naked capitalism, speaking on a critical moment in the capture of government by financial interests:
The turning point was in 1980, when the Reagan Administration was elected in the United States, right after Margaret Thatcher led Britain’s Conservatives into office and began the big privatization sell-offs at enormous, unprecedented commissions that made the financial sector richer than ever before. Drexel Burnham led the practice of turning the stock market into a vehicle for banks to emulate their real estate loan departments by creating credit for corporate raiders to take over companies, load them down with debt and extract profits to pay out as interest. This was done by downsizing the labor force, shifting over to non-union labor, and where possible, renegotiating employee pensions downward or simply grabbing the pension funds or Employee Stock Ownership Plans (ESOPs) to pay creditors. So corporate finance became destructive instead of productive.
This sort of banking has concentrated wealth, and used it to privatize and buy control of governments and their regulatory agencies. Banks have lobbied to keep interest tax-deductible so as to favor corporate financing by issuing bonds and taking out loans instead of issuing stocks. Bank lobbyists back the political campaigns of lawmakers committed to deregulating the banking industry and its major clients (real estate, natural resources and monopolies). It even has taken over the Justice Department and the courts, so that financial fraud in America has been decriminalized, as there is no regulation of outright criminal behavior. This is especially true of the largest banks such as Citibank and Bank of America where the fraud tends to be concentrated, as my colleague William Black at the University of Missouri at Kansas City has shown.
