According to "Dr. Truth", economist Nouriel Roubini, the financial reform bill didn't address any core issues in the economic crisis, but was merely "cosmetic." On May 18, Roubini said:
“We need more radical reforms," he added. "The idea that we’ll be able to close down an institution like Goldman (Sachs) in an orderly way—a business that operates in nearly a hundred countries—is absurd.”The financial reform bill revealed once again that a major obstacle in fixing the financial crisis is embedded corruption in the Senate. The much talked-about "Audit the Fed" bill, that Dr. Paul, Rep. Grayson, and others lobbied for, was not passed. And there were many loopholes in the bill. Arthur Delaney of The Huffington Post reported:Roubini, an NYU professor who has been called "Dr. Doom" for his dire economic outlook, said the three main problems with big banks like Goldman were that they were 1) Too big to fail, 2) Too big to be bailed out and 3) Too big to be risk managed.
"Obtaining a carve-out isn't rocket science," said a Republican financial services lobbyist. "Just give Chairman Dodd [D-Conn.] and Chuck Schumer [D-N.Y.] a shitload of money."Matt Taibbi highlighted the discrepancy between the guys fighting for reform on Capitol Hill, and the guys are doing everything they can to block it in his latest Rolling Stone article "Wall Street's War":
"In the weeks leading up to the vote on the reform bill, I hear one variation or another on this same theme from Senate insiders: that the usual process of chipping away at key legislation is not taking place with its customary dispatch, despite a full-court press by Wall Street. The financial-services industry has reportedly flooded the Capitol with more than 2,000 paid lobbyists; even veteran members are stunned by the intensity of the blitz. "They're trying everything," says Sen. Sherrod Brown, a Democrat from Ohio. Wall Street's army is especially imposing given that the main (really, the only) progressive coalition working the other side of the aisle, Americans for Financial Reform, has been in existence less than a year – and has just 60 unpaid "volunteer" lobbyists working the Senate halls."Phil Angelides, who is the Chair of the Financial Crisis Inquiry Commission, says that the lack of economic pain felt by banking institutions on Wall St. like Goldman Sachs is making it more likely that another crash will occur, because people who don't learn the hard lessons the first time around, are forced to learn even harder lessons later on. Angelides told Fox Business:
In September of 2008, the fear was that a great crash would occur unless Congress ponied up hundreds of billions to Wall Street banks and firms, but after twenty-one months, stability is still missing in the global financial system. The massive reduction of jobs since the bailout almost feels like a crash did occur, so what was the vast amounts of public money used for?“Legislation itself doesn’t equal institutional reform,” he said. “The SEC regulated five firms and the Fed all the banks and that didn’t stop what happened from happening. I think these Wall Street guys will forget what happened pretty quickly, because unlike most other businesses (including his own) Wall Street was bailed out and spared from what usually happens when you make bad bets and take too much risk.”
It’s one of the things he finds most troubling about the various Wall Street executives who have given testimony to his committee - people like Goldman Sachs (GS: 145.13, 1.16, 0.81%) CEO Lloyd Blankfein, and former Bear Stearns CEO Jimmy Cayne. Because of the bailouts of 2008 and 2009, the massive Fed easing and other programs to bolster banking balance sheets, Wall Street returned to profitability almost immediately after the 2008 crash (witness the $12 billion Goldman earned in 2009, and the nearly $3.5 billion it cranked out during the first quarter of 2010).
For that reason Angelides believes the CEOs of the big firms really haven’t come to terms with how their lack of respect for risk destroyed the financial system.
“Their level of self reflection is an inch deep,” he says.
According to Washington's Blog, the giant banks, the Federal Reserve, and the Treasury "have all blackmailed America":
If the too big to fails say that the world economy will crash and there will be martial law unless they are bailed out, politicians - most of whom don't understand finance or economics - will believe them, and sound the alarm themselves.What transpired during the bailout craze in the fall of 2008 was an exchange of money between citizens of a country and a rogue group of financial terrorists, so says financial analyst Max Keiser. Keiser dubs former Treasury Secretary Hank Paulson as the "Bin Laden" of American capitalism. Though the label is purposely hyperbolic, there is a great deal of truth in relating the actions of an ideological terrorist group like Al Qaeda with those of a financial terrorist group like Goldman Sachs.
Economist James K. Galbraith told the Senate Judiciary Committee in May that the financial crisis can't be understood as an economic problem, but as a law problem. What's required is not an "FIB" - a Financial Inquiry Board, but the F.B.I. Galbraith advised the Congress to take severe action; not fluff, but cuffs for Wall Street's bluffs:
"Control frauds always fail in the end. But the failure of the firm does not mean the fraud fails: the perpetrators often walk away rich. At some point, this requires subverting, suborning or defeating the law. This is where crime and politics intersect. At its heart, therefore, the financial crisis was a breakdown in the rule of law in America."
But assigning blame after a colossal crisis is not as easy as it appears. FCIC Chair Angelides says that deeply ingrained cultural beliefs rather than criminal motives explains the lack of judgment by Wall St. bankers before the crisis. From Fox Business:
The role of culture and beliefs in the lead-up to the financial crisis was a point made by Simon Johnson, the former Chief Economist of the IMF, in his May 2009 article "The Quiet Coup." Johnson says that many U.S. politicians, and the U.S. elite in general, believed that the work that Wall St. institutions did for the economy was irreplaceable, which made them untouchable. So Goldman Sachs is less like Al Qaeda and more like Al Capone. Johnson:Understanding the crisis is something that Angelides believes is not just necessary but vitally important (he is mandated to produce a report to Congress and the president by Dec. 15). There have been numerous books written about the financial collapse (including my own) but Angelides says he’s still worried about Wall Street “re-writing history.”
His committee has the authority to refer potential misconduct it uncover during the course of its examination of what cause the financial crisis to the proper investigative authorities, namely the Securities and Exchange Commission and the Justice Department.
“But most of what we have seen is not illegal activity,” he said. “What we are seeing is something that is actually more profound. These guys didn’t think they were doing anything wrong because the use of risk to make money was universally celebrated on Wall Street. This was a cultural thing — the culture of taking big risk and making big bets, which was handsomely rewarded until it destroyed the system.”
The rhetoric surrounding the financial crisis has not included words like "crime" "fraud" "terrorism" "coup" "corruption" or anything that speaks to the law-breaking nature of institutions like Goldman Sachs, Citigroup, and Bank of America. But that will most likely change as more and more people realize that jobs will not come back under the current system. As long as Wall St. is allowed to act recklessly by the government, it will. Why would any criminal clique or cartel respond to weak government requests and public sympathy?"In a primitive political system, power is transmitted through violence, or the threat of violence: military coups, private militias, and so on. In a less primitive system more typical of emerging markets, power is transmitted via money: bribes, kickbacks, and offshore bank accounts. Although lobbying and campaign contributions certainly play major roles in the American political system, old-fashioned corruption—envelopes stuffed with $100 bills—is probably a sideshow today, Jack Abramoff notwithstanding.
Instead, the American financial industry gained political power by amassing a kind of cultural capital—a belief system. Once, perhaps, what was good for General Motors was good for the country. Over the past decade, the attitude took hold that what was good for Wall Street was good for the country. The banking-and-securities industry has become one of the top contributors to political campaigns, but at the peak of its influence, it did not have to buy favors the way, for example, the tobacco companies or military contractors might have to. Instead, it benefited from the fact that Washington insiders already believed that large financial institutions and free-flowing capital markets were crucial to America’s position in the world."
In the Financial Times article,"The World Teeters on the Brink of a New Age of Rage," Simon Schama writes that the financial crisis will not be resolved unless economic pain is levied out justly. Otherwise, he says that things could get messy:
"At the very least, the survival of a crisis demands ensuring that the fiscal pain is equitably distributed. In the France of 1789, the erstwhile nobility became regular citizens, ended their exemption from the land tax, made a show of abolishing their own privileges, turned in jewellery for the public treasury; while the clergy's immense estates were auctioned for La Nation. It is too much to expect a bonfire of the bling but in 2010 a pragmatic steward of the nation's economy needs to beware relying unduly on regressive indirect taxes, especially if levied to impress a bond market with which regular folk feel little connection. At the very least, any emergency budget needs to take stock of this raw sense of popular victimisation and deliver a convincing story about the sharing of burdens. To do otherwise is to guarantee that a bad situation gets very ugly, very fast."Avoiding bloodshed is what all sane civilizations try to do. And the best way to avoid bloodshed is to practice justice, and apply the law to everyone in the community. Also, sharing the burden is what all healthy societies, both ancient and modern, do well. Balance in a system creates harmony, reducing the possibility of violence on any scale. In the financial system, where some institutions are seen as too big to fail, there are no thoughts for achieving balance. And that mental blindness, which is viewed by many as a lack of empathy, is creating social and political havoc.
Anybody who has been paying any attention to the state of the economy can see that we are entering an era where violence and counter-violence may become the norm, but we still have a small opportunity to jump out of that vicious circle before it starts spinning out of control. What the U.S. government is required to do is apply the rule of law rigorously to the lawbreakers on Wall Street. That's it. But if justice is not done, blood will spill in the streets, and it will spill in much greater velocity than the oil in the Gulf of Mexico.
