The Triumph of Wall Street: "Nothing has been fixed. Nothing has been changed ...." [View All]

Deregulation and the Triumph of Wall Street
Written by Garrett Johnson
September 11, 2009

One year removed from a catastrophic, global, economic meltdown, and 26 months removed from the start of the credit crisis, our political establishment is either unwilling or unable to reform the system and punish the perpetrators of this debacle. The situation is so far beyond the pale that it makes one wonder if another catastrophe is even avoidable.

In fact the proposed changes are extremely mild in comparison to the deregulations that preceded them in the previous decades. But Wall Street simply can't wait to return to the speculative frenzy of the recent credit bubble, and now that most of the risk has been offloaded onto the American taxpayer, Good Times Are Here Again.

Companies are selling exotic financial products similar to those that felled markets and the world economy last fall. And banks' appetite for risk has grown: The nation's top five banks collectively stood to lose more than $1 billion on an average day in the second quarter of 2009 should their trading bets go sour, a record level. Now, the federal government is locked in a kind of regulatory limbo. U.S. officials say they are committed to preventing history from repeating and have pleaded for fresh powers to do so. But today, they have few new options -- excepting another bailout -- should financial markets seize up again or a large institution totter. "There's no fundamental change in the way the banks are run or regulated," said Peter J. Solomon, a former Lehman vice chairman who runs an eponymous investment bank in New York. "There's just fewer of them."

Perhaps the best indicator of Wall Street's revived exuberance is its continued pursuit of exotic financial engineering. The market for credit derivatives, widely blamed for helping destabilize markets, remains vast....Total return swaps -- a type of derivative that lost favor during the crisis -- are among the instruments regaining popularity, bankers and investors say....Even collateralized debt obligations, perhaps the biggest money-loser in Wall Street history, are staging a comeback of sorts.

So after trillions of bailouts and guarantees at the taxpayer expense, banks have used that taxpayer money to thwart any reform legislation, while returning to risky investment practices at an even greater level than ever. And when things blow up again, we can expect an even larger bailout than before. Or another Great Depression. Or both.

Nothing has been fixed. Nothing has been changed, because we gave money to the people that caused the problems and demanded nothing in return.

Please read the complete article at:

http://www.bitsofnews.com/content/view/10878/