Mervyn King, Governor of the Bank of England:
Financial services don’t like the word ‘casino’, but instruments were created and traded only within the financial community. It was a zero sum game. No one knew which ones were winners when the crisis hit. Everyone became a suspect. Hence, no one would provide liquidity to any of those institutions.
We allowed a [banking] system to build up which contained the seeds of its own destruction.
It's time we recognize what went on with the financial system meltdown: the major players created instruments of little or no value to the economy, they were simply making bets among themselves about what would happen. They helped inflame the massive run up in property values and when the music stopped, values established during the bubble were reversed and what remained was a unhealthy amount of debt. As GDP fell and unemployment grew, ordinary people couldn't pay their mortgages, but bankers and the other culprits suffered little or no pain--their bonuses had already been banked. The government saved their jobs and they live to start betting again.
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