Stories like this make me pretty angry at Wall Street. And I think they ought to make more people mad, too.
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- I get a kick out of reading people's reactions to this stuff. This article does not prove everyone on Wall Street is a crook as the author suggests over and over. However, those dismissing the article as rubbish can't even admit that Wall Street has the motive and opportunity for corruption. Both those positions are so outlandish and sheepish.
Our country is not broken because of Wall Street. Our country is broken because liberals and conservatives (maybe 60% of the country) live in fantasy worlds.
The left would limit Wall Street only to what it understands and can regulate. It promises stability and more equality - yet is a clear recipe for stagnation and decline.
The right would unleash the full force of "free markets" on the people - without any comprehension of what that even means. Capitalism works on trust - information is ALWAYS asymmetrical and people and companies have to rely on the information they receive from others. Regulations exist because people will steal and lie for money - and will do so even more easily if the victim is nameless or faceless (this is fact - not a liberal bias!). It promises growth and wealth creation - but is a clear recipe for corruption, inequality and eventual instability.
The obvious answer is a compromise between these two positions. That is what America used to do. Rational adults can solve this - but the real problem is our politicians are either 1) not rational adults or 2) don't want to solve it. Either way, it is a crisis and we are not near solving it.Jun 24, 2012
- , I appreciate your call for a middle ground. You're certainly taking a more mature and intelligent look at the situation than most. I'm not an expert in this area, so I would be interested to here an explanation of your claim that limiting banking to be simple is a "clear recipe for stagnation and decline." I don't see any evidence that financial innovations like CDOs and high-frequency algorithmic trading have improved our economy. I don't see any evidence that the Glass-Steagall Act's separation of commercial and investment banking, which was in place from 1933 to 1999, caused "stagnation and decline," considering America's incomparable growth and prosperity during those 66 years. So I'm inclined to agree with Elizabeth Warren that "banking should be boring."Jun 24, 2012
- Speaking of fantasy worlds it is instructive to re-read what various policitians and newspapers said when the last fork was stuck in Glass-Steagall:
Phil Gramm (who passes for 'conservative'): 'The world changes, and Congress and the laws have to change with it'
Bill Clinton (who passes for 'liberal'): 'This legislation is truly historic, we have done right by the American people.'
Larry Summers (who also passes for 'liberal'): 'With this bill, the American financial system takes a major step forward toward the 21st Century -- one that will benefit American consumers, business and the national economy.'
All of the above from the (presumably approving) 'liberal media' [The New York Times, November 13, 1999 (page A1)]
Meanwhile The Nation Magazine wrote in their editorial of November 15, 1999:
'For their money, the finance industry bought not only the end of the Glass-Steagall Act but also the partial repeal of the Bank Holding Company Act. These landmark pieces of legislation, recognizing the inherent dangers of too great a concentration of financial power, barred common ownership of banks, insurance companies, and securities firms... The misnamed Financial Services Modernization Act will usher in another round of record-breaking mergers... concentrating financial power in trillion-dollar global giants and paving the way for future taxpayer bailouts of too-big-to-fail financial corporations.'
I think we can safely score that one now: The Nation Magazine 1, Everybody Else 0.Jun 24, 2012
- did you look at 's profile?Jun 24, 2012
- - Certainly...I do understand your point about historical prosperity, but I think a large part of that prosperity can explained by the complete destruction of the German, UK, France, Russian and Japanese economies during WW2. We were left pretty unscathed and without real global competition for 30.
I agree with your assessment that Glass-Steagall would add stability back into the financial sector. But, without similar rules for other multinational banks, US banks will be at a disadvantage globally. Banking profits and bonuses (and eventually talent) would move overseas and with it - most real financial innovation. So of that innovation is destabilizing and would not be missed, but other innovations have been very good for banks and society overall (think VC). Shipping both the good and bad overseas might be more stable, but US banking would stagnate and decline. IMHO, we need to cut with a scalpel and not an axe.Jun 24, 2012
- -- a very good point about the role of multinational and foreign banks! I honestly hadn't really been thinking about the complexities of international law and finance, and talent drain. Still, if other countries want to foster the talent and innovation that produces these financial weapons of mass destruction, then I say, "Have at it, Hoss."Jun 25, 2012