It’s becoming increasingly clear that not only did the actions of many of the big hitters in finance hurt all of us, but that they really hurt their own firms too: witness the long list of big names who’ve been burnt in the Madoff affair, and don’t even appeared to have wanted to ask basic questions before handing over 100s of millions of dollars of their investors money.
But the observation that there exist greedy people who will do anything for a buck is not exactly earth-shattering. A more interesting question is this: why weren't people in government and even academia not as critical as they might have been about these things, and why are they still so muted in their response?
I think it's because of the psychology of wealth and its almost seductive lure. How often do you see a seemingly sensible person happen to meet someone Very Rich and come away gushing "He's such a smart guy, I hadn't realized what amazing insight he has" etc. People - especially otherwise rather impoverished academics and MPs - love to be around real money, and over time, invites to attend parties and speak at events start to affect their thinking. It's not usually corruption in the sense of brown paper bags or money wired to Swiss bank accounts, but a more subtle corruption of thought.
Economists who work in finance and related areas have a lot of clout via newspaper op-eds and being consulted by both private firms and the government. However, if you toe the line (or make a few interesting comments, enough to seem independent but not enough to case doubt on the whole enterprise) you get invited to cool rich parties and paid very well to speak at business lunches and so on. If you're more open, you will never enjoy any of that.
Equally, if you're in government, if you're too trenchant in your critique, you will be cut out of these activities. And you may be a long time retired from whatever cabinet post you currently hold. Think of how well former chancellors are received on the business circuit and among wealthy society: and how much they'd be hated if during their term they'd said things like this.
This is what I would call implicit corruption: it's not money in brown paper bags and conspiracies hatched in dark halls, but the insidious perversion of reason by the lure of wealth.
For me, this aspect of how extreme wealth distorts information gathering and regulatory activities in society (and tehreby makes the economy less efficient) is one of the strongest arguments in favour of limiting extreme wealth. I am convinced that Page and Brin would have started Google for expected future earnings in the millions (provided no one else was making more: people are very competitive). But if no one has vastly more than that, it's harder to bring about intellectual and political corruption on the grand scale we're now seeing.