Wall Street's Victory Lap: "financial reform has turned into a victory lap for Wall Street"

[Better Believe It]

Wall Street's Victory Lap
By Simon Johnson
MIT Professor and co-author of 13 Bankers
May 26, 2010

By now you have probably realized -- correctly -- that "financial reform" has turned into a victory lap for Wall Street.

When they saved the big banks, with massive unconditional support (both explicit and implicit) over a year ago, top administration officials promised they would be back later to fix the underlying problems. This they -- and Congress -- manifestly have failed to do.

Our banking structure remains unchanged, the rules will be tweaked at the margins, and the incentive and belief system that lies behind reckless risk-taking has only become more dangerous.

This is beyond disappointing.

No doubt the administration feels good about what it has "achieved" on financial reform. The public aura of mutual congratulation will last for about three weeks.

But outside of the inner White House-Capitol Hill bubble, it is very hard to find anyone well-informed about the financial system who thinks that anything substantial has changed or that risks will be better managed as we head into the next cycle.

The 13 bankers have won, completely. Here we go again.

Read the full article at:

http://www.huffingtonpost.com/simon-johnson/wall-streets-victory-lap_b_590044.html

[JeffersonChick]

1. Track the bill on OpenCongress

You can track this bill here:

http://news.opencongress.org/bill/111-s3217/show">S.3217 - Restoring American Financial Stability Act of 2010

[Octafish]

2. Nah. It's not fascism.

It's a plutonomy. Yeah yeah. Big difference.

[ProSense]

3. I doubt Wall Street is doing a victory lap.

The two measures, included in the Senate bill passed last week, take direct aim at some of the more risky -- and profitable -- parts of banks' business.

One proposal would require financial firms to spin off their trading desks that deal in derivatives.

The other -- dubbed the Volcker Rule for its proponent, former Federal Reserve Chairman Paul Volcker -- would ban banks from wagering with the firm's own money, what the industry calls "proprietary trading." Firms would also be restricted from investing in or sponsoring private-equity funds or hedge funds.

The restrictions, if included in the final bill, would hit bank profits.

link

The Senate version of financial regulation hits Wall Street harder than expected, with some analysts estimating it could cut the profits of major financial institutions by roughly 20%.

Critics of a comparable bill that passed the House in December said the Senate version has fewer escape routes and exceptions that leave room for Wall Street firms to work around new restrictions on their riskiest activities.

link

Reinventing financial regulation

The landmark legislation approved by the Senate on Thursday evening represents the most profound restructuring of financial regulation since the Great Depression. Here are some of the highlights of the bill, which was born out of the wreckage of the recent financial crisis, and the problems it is designed to address.