A Year After a Cataclysm, Little Change on Wall Street NYTimes, Sep 12, 2009

[nodular]

Below are some paragraphs from the article. Geithner and Bernanke, unfortunately have spent the year doing nothing but handing out money and financial guarantees to banks, insurance companies, and other financial institutions. The result is a paper-thin recovery that will definitely collapse inside of 6 months from today, in my opnion.

As one financial guru I was listening to on the BBC said today (sorry, don't know who), "It's not a V, its a W, and we are in the middle."

What we should do, in my opinion, is bring back the Glass Steagal reforms we repealed in the 1990s. But nearly everyone agrees we need to do something. Obama agrees too, as his recent Wall Street speech demonstrates, but most of his energy seems to go to other things---like health care, cap and trade, and foreign relations. I suppose he thinks these things are more important. We shall see.


http://www.nytimes.com/2009/09/12/business/12change.html


"'Backstopped by huge federal guarantees, the biggest banks have restructured only around the edges. Employment in the industry has fallen just 8 percent since last September. Only a handful of big hedge funds have closed. Pay is already returning to precrash levels, topped by the 30,000 employees of Goldman Sachs, who are on track to earn an average of $700,000 this year. Nor are major pay cuts likely, according to a report last week from J.P. Morgan Securities. Executives at most big banks have kept their jobs. Financial stocks have soared since their winter lows.

"'The Obama administration has proposed regulatory changes, but even their backers say they face a difficult road in Congress. For now, banks still sell and trade unregulated derivatives, despite their role in last fall’s chaos. Radical changes like pay caps or restrictions on bank size face overwhelming resistance. Even minor changes, like requiring banks to disclose more about the derivatives they own, are far from certain...

"'In fact, though, regulators and lawmakers have spent most of the last year trying to save the financial industry, rather than transform it. In the short run, their efforts have succeeded. Citigroup and other wounded banks have avoided bankruptcy, and the economy has sidestepped a depression. But the same investors and economists who predicted, and in some cases profited from, the collapse last fall say the rescue has come at an extraordinary cost. They warn that if the industry’s systemic risks are not addressed, they could cause an even bigger crisis — in years, not decades. Next time, they say, the credit of the United States government may be at risk...


"'Robert J. Shiller, the Yale University economics professor who predicted the dot-com crash and the housing bust, said the window for change may be closing. “People will accept change at a time of crisis, but we haven’t managed to do much, and maybe complacency is coming back,” Professor Shiller said. “We seem to be losing momentum.”"'


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