Friday, January 08, 2010
Reform of Wall Street
"Financial crisis panel seeks bankers' testimony" is the heading of a report by Binyamin Appelbaum in The Washington Post, Jan 8, 2010:
The commission appointed by Congress to examine the causes of the financial crisis is to hear testimony Wednesday from the heads of four of the nation's largest banks, as the panel begins a year-long investigation that its chairman described as an effort to figure out "what the heck happened."
Numerous reports in the media have given us a good idea of "what the heck happened". Major Wall Street financial organizations took part in questionable practices and made a lot of money until the mortgage finance bubble collapsed and caused repercussions that affected the entire U.S. economy. Those responsible were bailed out by our government which failed to include conditions to restrain them. No punishment was sought. Wall Street continues to be involved in exotic financial instruments and make profits.
The commission's report, when released sometime before the end of the year, would most likely be a sterile document and serve no purpose.
We hear occasional rumblings from the White House about reform. But a meaningful reform with teeth is not going to take place. Elected representatives on both sids of the aisles receive contributions from special interest groups. Lobbyists continue to wield power and influence legislations. The Republicans, of course, are out and out champions of unfettered free market economy, and the abuses that took place were, to some degree, due to the failure or unwillingness of watchdog agencies to perform what they were meant to.
The Democrats are not blameless. Key positions in President Obama's team are occupied by people who were directly or indirectly part of Wall Street when the looting went on. Among them Treasury Secretary Timothy Geithner who was head of the Federal Reserve Bank of New York.
Bloomberg.com: Treasury Secretary Timothy Geithner was asked to testify in Congress about the New York Federal Reserve’s efforts to limit American International Group Inc.’s disclosures of bailout payments to banks.
Paul Krugman in New York Times, Jan 7, 2010:
Bubbles and the Banks And reform really should take on the financial industry’s compensation practices. If Congress can’t legislate away the financial rewards for excessive risk-taking, it can at least try to tax them. Let me conclude with a political note. The main reason for reform is to serve the nation. If we don’t get major financial reform now, we’re laying the foundations for the next crisis. But there are also political reasons to act. For there’s a populist rage building in this country, and President Obama’s kid-gloves treatment of the bankers has put Democrats on the wrong side of this rage. If Congressional Democrats don’t take a tough line with the banks in the months ahead, they will pay a big price in November. |
They will deserve what is coming to them. Unfortunately, at the end nothing will change. One group of
venal legislators would be replaced by another.....probably even more venal.
