By now you have probably realized -- correctly -- that "financial reform" has turned into a victory lap for Wall Street.
When they saved the big banks, with massive unconditional support (both explicit and implicit) over a year ago, top administration officials promised they would be back later to fix the underlying problems. This they -- and Congress -- manifestly have failed to do.
Our banking structure remains unchanged, the rules will be tweaked at the margins, and the incentive and belief system that lies behind reckless risk-taking has only become more dangerous. (The back story, if you can still stomach it, is in 13 Bankers).
There is only one small chance for any sensible progress remaining -- and you are about to see this crushed in conference by the supporters of unfettered big banks.
Senator Blanche Lincoln's proposal with regard to derivatives has much to commend it. A fiduciary duty for swaps dealers vis-à-vis customers would be entirely appropriate -- in fact long overdue.
Real time price reporting should also help regulators at least begin to understand what is driving market dynamics, for example around the May 6 "flash crash" -- a point that Senator Ted Kaufman has also been making most forcefully.
Legal authority against market manipulation would be greatly strengthened and there would be more protection for whistleblowers. And the kind of transaction that Goldman entered into with Greece -- a swap transaction with the goal of reducing measured debt levels, effectively deceiving current and future investors, would become more clearly illegal. All of this is entirely reasonable and responsible -- and completely opposed by the most powerful people on Wall Street.
Of course, most of the anti-Lincoln fire has been directed against the idea that "swaps desks" would be "pushed out" to subsidiaries -- i.e., the big broker-dealers could still engage in these transactions, but they would need to hold a great deal more capital against their exposures, thus making the activities significantly less profitable.
It is striking that while Treasury argues that increasing capital is the way to go with regard to financial reform, they are adamantly opposed to what would amount to more reasonable capital levels at the heart of the derivatives business.
This is beyond disappointing.
No doubt the administration feels good about what it has "achieved" on financial reform. The public aura of mutual congratulation will last for about three weeks.
But outside of the inner White House-Capitol Hill bubble, it is very hard to find anyone well-informed about the financial system who thinks that anything substantial has changed or that risks will be better managed as we head into the next cycle.
"Business as usual" is the abiding legacy of the Obama administration with regard to the systemic risks posed by this financial system. Treasury and White House let us down repeatedly and completely in the last 18 months on financial sector issues -- just as they did (as decision-making bodies and as some of the same individuals) at the end of the 1990s.
At one point in early 1998, Larry Summers called Brooksley Born -- the last person who really tried to rein in the dangers posed by derivatives (and it was a much lower level of danger then compared with now). Summers reportedly said, "I have thirteen bankers in my office, and they say if you go forward with this you will cause the worst financial crisis since World War II."
We now seem to have come full circle to exactly the same people saying exactly the same things -- no doubt top people in the administration are now calling Senator Lincoln and impressing upon her a version of the same point made by Summers to Born.
The 13 bankers have won, completely. Here we go again.
This post originally appeared at The Baseline Scenario.
In Interior, the extraction industries got their go to man at the top - Salazar. Surprisingly, little changed for the better from Bush's regime.
And in Finance, the financial industries got men they trusted - men whose careers they had made - in the case of Summer, a man who had been recently paid millions in "consulting fees". Guess what - they are getting what they want.
The Bush administration continues, with a new face at the top.
Unfortunately, in many areas and especially the financial structure, we had already gone too far in the direction of giving free reign to powerful, strong willed, rich people with big agendas - to further enrich themselves.
At one point, Obama said, I have met the CEO of Goldman and he is a nice man, or words to that effect. To which I say Of course. We are not talking people who tie the kidnapped girl to the railroad tracks. We are talking people who have been very successful in one venue and want to continually strengthen and enhance it.
Goes for the military as well. Which is why giving them free reign is also a mistake.
If anyone knows how to fix this, HELP HELP HELP!!! We're in trouble here!
You failed to mention that many Americans brought a lot of things upon themselves by not being prepared for their future, and by running up staggering amounts of credit card debt. These people were living beyond their means and loving every minute of it, until the wheels started to fall off of the wagon.
The snark weasel, Blankebein, smirking at the camera knowing fullwell that the heat is off the financial industry because the meat-tia will now concentrate on blaming Obama for British Petroleum, TranOcean and Haliburton's oil spill. This is the condition of our news system, thanks to "Survivor" and all other idiot TV programming. For an hilarious take on this watch Mike Judge's "Idiocracy".
"Too Big To Fail" when the reality is:
"Too Big To Jail"?!?!
Does any reasonable person believe that our Politicians whether ELECTED or DEFEATED are going to "kill" the goose that lay the golden eggs..namely the contributions ($$$$$$) by the "Big" to have those Politicians ELECTED or DEFEATED? Just watch the Percentage of Contributions to each party from the same Lobby!
It is irrelevent who wins the election and who is defeated!
Whoever wins (Dem or Rep) is an UNDERLING of the "Big" and does exactly what the "Big" wanted.
You might want to look at what 18 years of "conservative" rule did to Iceland, for example.
It only destroyed the country's three major banks and brought the country itself to its knees, that's what it did.
The present government is trying to pay the bill, although Iceland's parliament is probably almost as useless as Congress and Senate are in the US.
The problem isn't so much the fact that the American political toilet is overflowing.
It's the bacteria in the water.
what makes this fact even more frightening is when it is underscored by the recent supreme court decision to allow unlimited corporate spending in elections. we now have a situation where virtually no politician will be able to escape the wrath of the corporate elite which translates into no politicians who are TRULY willing to significantly change the status quo. and even if they be willing their opponents, backed by corporate coffers, would most likely defeat them at the polls.
with the increasingly sordid tale of bp which has still yet to be fully revealed, its clear that this country has long ago ceased to be a democracy. we live in a plutocracy and americans can either ACCEPT it or CHANGE it but complaining about it while electing those who serve the interests of the industrial elite certainly doesn't help...regardless of their party affiliation...!!!
at the end of the day, bp is ultimately responsible for this disaster. its their well and they are the ones to reap the profits from the oil they collect and sell from it. of course, there is residual blame to be dispersed to the subcontractors including halliburton and transocean, but at the end of the day, bp has the most to lose and therefore needs to "own' this disaster. what infuriates me is the lack of transparency bp has shown regarding the truth about the extent of the spill and their evasive efforts to try to cap their liability. for a company who would not hesitate to raise prices at the pump to maximise profits, i find it reprehensible that they would try to shirk their responsibility for the consequences of this spill. i certainly hope that the administration brings the full weight of its authority to bear once some semblance of control of the leak has been determined...
Perhaps it is time to close the lobby doors. At the moment the tacit "means test" used to access that room in the legislature, favors a very narrow socio-econimic class.
americans first need to UNDERSTAND that this is not about DEMS V. GOP. this is REALLY about whether or not the PEOPLE are truly engaged and interested in pushing back against the corporate interest. which means that we FUNDAMENTALLY need to change the way we do business. we can't continue to be a blind consumer society and not expect the corporations to lie; cheat and steal from us at every opportunity...!
i fear that we have already crossed that event horizon and as long as the recent supreme court ruling remains law, then the deck will forever be stacked against the will of the people. in which case that movement towards "a more perfect union" is nothing more than a utopian ideal...!