Simon Johnson’s thesis that our government has been captured by the financial services industry is only partially true. For all our complaints, we do live in a mature democracy, with a dispersed government. It’s hard for any one minority interest to hijack the entire government apparatus.

The many, many trillions that our government is putting on the line to maintain high house prices is not just to make some bankers richer, or to put another million in the pockets of a few more Congressmens’ relatives and friends. It’s done to make homeowners happy. They are over 3/4 of all voters. Add all the professionals whose livelihood depends on free money, and you have an unbeatable force that can and does control our government.

Take away the professionals, and the voter block is still powerful, but much weaker. Take away the voters, and you can divert a few hundred billion at most, not 10 trillion (in direct subsidies and indirect guarantees).