Diminished trust

Anne Applebaum at Slate on the economy:

…The question now is whether American capitalism will also change over the next two decades—and for the worse.

Reading the accounts of the collapse of Bernard L. Madoff Investment Securities, it is impossible not to conclude that it will. The scale of this fraud stretches far beyond anything a car dealer or even the purchaser of an apartment might commit, of course: Among the victims of Madoff's extraordinary pyramid scheme are major banks (BNP Parisbas, Nomura Securities), famous people (Mort Zuckerman), and Madoff's friends from the Palm Beach Country Club. In the wake of Madoff's arrest, charities are going to close, and previously rich people will become poor. Worst of all, everyone who invests anywhere will think just that much harder, take that much longer, demand that much more documentation. And they will do so not only because of Madoff, but because of the subprime lenders, Wall Street investment banks, and Enron fraudsters who have worked so hard to erode our faith in the reliability of our system.

I think she’s overly pessimistic but I do think she’s right that the level of trust has greatly diminished and will take a long time to recover.