More than favoritism?

(response to cactus, lifted from comments, by juan. Slightly edited for readability))

‘Favoritism’ seems too kind while also continuing to assume legal-political institutions [‘the state’] to be dominant rather than dominated, which is then to avoid the question of which class or class segment dominates through the mediation of ‘the state’.

Willem Buiter put it rather nicely in a recent FT article:

The banking establishment and the financial establishment representing the beneficial owners of the institutions exposed to the banks as unsecured creditors – pension funds, insurance companies, other banks, foreign investors including sovereign wealth funds – have captured the key governments, their central banks, their regulators, supervisors and accounting standard setters to a degree never seen before.

I used to believe this state capture took the form of cognitive capture, rather than financial capture. I still believe this to be the case for many, perhaps even most of the policy makers and officials involved, but it is becoming increasingly hard to deny the possibility that the extraordinary reluctance of our governments to force the unsecured creditors (and any remaining non-government shareholders) of the zombie banks to absorb the losses made by these banks, may be due to rather more primal forms of state capture.

How about President Obama, what did he have to say while still a lowly Senator back in September, 2007:

Turning a blind eye to the cronyism in our midst can put us all in jeopardy… We will not tolerate a market that is rigged by lobbyists who don’t represent the interests of real Americans or most businesses…we are going to have to adapt our institutions to a new world…”

by juan