The New Financial Crisis, Same as the Old One?
Don’t have time to read thousands of pages of (purposefully) arcane legislation, to figure out whether the financial reform bill Congress passed this Summer really reforms how Wall Street does business? (I guarantee you that few if any members of Congress read the bill in its entirety, either).
Here are the Cliff’s notes, courtesy of Matt Taibbi (now infamous for calling Goldman Sachs “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells of money”) :
What happened to our economy over the past three years, and is still happening to it now, was not an accident or an oversight, but a sweeping crime wave unleashed by a financial industry gone completely over to the dark side. The bill Congress just passed doesn’t go after the criminals where they live, or even make what they’re doing a crime; all it does is put a baseball bat under the door and add an extra lock or two on the doors. It’s a hack job, a C-minus effort. See you at the next financial crisis.
–Matt Taibbi, “Wall Street’s Big Win”; The Rolling Stone (8/19/2010)
In damning (and depressing) detail, Taibbi lays bare how senior members of both parties gutted the so-called “Volcker Rule” and the “Lincoln Rule” — the bill’s two provisions aimed at shutting down proprietary trading and derivatives trading, respectively.
As Taibbi, Michael Lewis, Barry Ritholtz and numerous others have now chronicled in great detail, it was precisely those two activities that lay at the foundation of the financial melt-down that started in 2008 and is still plaguing our economy.
Here is Taibbi’s sum-up:
Over a long year of feverish lobbying and brutally intense backroom negotiations, a group of D.C. insiders fought over a single question: Just how much of the truth about the financial crisis should we share with the public? . . . Do people need to know the real version, in all its majestic whorebotchery, or can we get away with some bullshit cover story? In passing Dodd-Frank, they went with the cover story.
Besides the sheer skulduggery of what transpired on Wall Street, what I find most dismaying is that the most vocal and impassioned critics — still — are people like Jon Stewart, Matt Taibbi, and Ritholtz.
In other words, entertainers, journalists, and bloggers far removed from the actual levers of power.
It’s as though we’re living through a financial Watergate, but this time the Woodward’s and Bernstein’s are being muscled aside.