He writes

Just as in emerging-market crises, the weakness in the banking system has quickly rippled out into the rest of the economy, causing a severe economic contraction and hardship for millions of people.

But there’s a deeper and more disturbing similarity: elite business interests–financiers, in the case of the U.S.–played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.

Read the whole thing. Johnson is one of the two great bloggers at baseline scenario. He has other, lesser credentials, including a stint as chief economist of the International Monetary Fund.

The one complaint that I would make is that Johnson focuses on examples of deregulation that enabled the financial sector to grow. I do not think those are as important as the risk-based capital regulations themselves, which took a complacent view of AAA-rated assets. I think it is important to recognize that regulation per se was as much a part of the problem as part of the solution. Having said that, Johnson’s main prescription is to reduce the power of big banks, which I think is quite right.

Read the whole thing. Did I say that already? Fine, read it twice.

UPDATE: Megan McArdle has more. She writes,

One of the similarities between the last decade and the 1920s that has not been much remarked on in the popular press is the absolute flood of foreign capital that hit Wall Street.

Read her whole post, also.