And the banks—hard to believe in a time when we're facing a banking crisis that many of the banks created—are still the most powerful lobby on Capitol Hill. And they frankly own the place
—Senator Dick Durbin
Before tackling the Financial "Reform" passed by the Senate last week, this seems like a good time to trot out The Wheel Of Suffering.
As problems become more intractable over time, our resistance to making real changes to confront those problems, our social inertia, becomes more entrenched, which makes those problems worse
Although the bills passed by the Senate and the House must now be reconciled behind closed doors, our lapdog media is (mostly) reporting that the impending law represents the most sweeping changes to financial rules since the Great Depression. Memories being short, it is rarely reported that the new law was preceded by the most sweeping deregulation of financial rules since the Great Depression. The new rules will not restore the power & scope of the old rules that served us so well for so long.
I can summarize the relative importance of the new rules in three quotes.
- The most sweeping changes to financial rules since the Great Depression might not prevent another crisis.
Experts say the financial regulatory bill approved by the Senate last week, and a similar bill that passed the House, include loopholes and gaps that weaken their impact. Many provisions depend on the effectiveness of regulatory agencies — the same agencies that failed to foresee the last crisis. [Associated Press via Yahoo Finance]
- Washington's proposed financial reforms do not solve the "too big to fail" problem, and are likely to add confusion and uncertainty to the process of dealing with troubled financial institutions, turnaround experts said on Monday. [Associated Press]
The financial reform legislation making its way through Congress has Wall Street executives privately relieved that the bill does not do more to fundamentally change how the industry does business.
Despite the outcry from lobbyists and warnings from conservative Republicans that the legislation will choke economic growth, bankers and many analysts think that the bill approved by the Senate last week will reduce Wall Street’s profits but leave its size and power largely intact. Industry officials are also hopeful that several of the most punitive provisions can be softened before it is signed into law. [New York Times]
The Senate's passage of the Wall Street regulatory bill marks the near-completion of only one part of the financial reform process. If the Great Depression is any guide, not only will there be more Congressional action, but also industry and regulatory reform. This is only the beginning.
Congressional action in the wake of the Great Depression occurred over a course of several years, well after the 1929 stock market crash...
The Senate bill and any final bill it produces are best viewed not as the final say on this issue, but a significant milestone in what will be a continuing effort to appropriately regulate our financial system. It is a beginning.
I've got some news for Steven: this is not the 1930s and as Dorothy said in The Wizard of Oz, we're not in Kansas anymore. Wall Street's size and power is largely intact. The indefatigable Simon Johnson is also preparing his assault on the future—
Most importantly, everyone who wants to rein in the largest banks now has a much clearer idea of what to push for, what to campaign on, and for what purpose to raise money. This is the completely reasonable and responsible ask:
- The Volcker Rule, as specifically proposed in the Merkley-Levin amendment
- Constraints on the size and leverage of our largest banks, as proposed by the Brown-Kaufman amendment
When the mainstream consensus shifts in favor of these measures, or their functional equivalents, we will have finally begun the long process of reining in the dangerous economic and political power of our largest banks.
We will finally have begun the long process of reining in the dangerous power of the banks? Oh, my! I won't bash Johnson as I have in the past, but c'mon Simon—Wake Up! They're planning to put the Consumer Protection Agency under the auspices of the Federal Reserve! I mean, how bad can things be? Does it get any worse than that? Ask Bill Black what he thinks about this situation.
Why is it that we will always fix things later?
If you're following the issue, you're going to hear—and have already heard—a lot of bullshit in the coming weeks about "progress" in finalizing Financial "Reform." Always bear in mind that most of the purveyors of this nonsense have always lived in an economic system dominated by Finance. Having never experienced a Real Economy, they don't know the difference between a legitimate economy and a Rip-off Economy.
When the financial bullets start flying again in the not-so-distant future, be sure to Duck & Cover—that's all you can do.