In an Op-Ed piece for the NY Times called The End of the Financial World as We Know It, Michael Lewis and David Einhorn explore what checks and balances should have been in place to prevent the US financial markets from running themselves into the ground in search of perpetual short-term gain.
Our financial catastrophe, like Bernard Madoff's pyramid scheme, required all sorts of important, plugged-in people to sacrifice our collective long-term interests for short-term gain. The pressure to do this in today's financial markets is immense. Obviously the greater the market pressure to excel in the short term, the greater the need for pressure from outside the market to consider the longer term. But that's the problem: there is no longer any serious pressure from outside the market. The tyranny of the short term has extended itself with frightening ease into the entities that were meant to, one way or another, discipline Wall Street, and force it to consider its enlightened self-interest.
Here's part 2, in which Lewis and Einhorn propose some possible remedies.