The events leading up to the U.S. financial crisis all the way up to the aftermath of the crisis and recession, there was all the big talk about how Wall Street caused damage to the Main Street, politicians calling for civil and criminal investigations, harsh punishments, and strong regulation. Guess what, none of that happened. The Wall Street accountability is now officially a forgotten episode in the U.S. financial history.
For those of us that are not fully aware of what actually caused the crisis and heard of buzz words that meant alien such as “mortgage-backed securities”, “derivatives”, “predatory lending”, may I suggest watching “The Inside Job”, a powerful movie narrating the events that led to the financial meltdown.
Not only was there no punitive action taken against any of the rogue companies, in some instances, as we have now come to know, there were huge bonuses to the people working in these companies. Whatever happened to the civil fraud action against Goldman Sachs. Oh wait a minute, that was “settled”. Yes, you do not believe that a fraud action results in paying a “few pennies” at least by Goldman standards and they get to go home clean? See this:
http://www.democracynow.org/2010/7/16/goldman_sachs_settles_civil_fraud_case
Conflict of Interest: Academicians in the Economics discipline in bed with Wall Street? You be the judge. There have been several dozens of cases where professors, deans, and other members of economics discipline have taken thousands of dollars in “consulting fees” to write reports that are favorable to companies. Think of it as a Scientist researching a disease writes a report that a certain drug works great on the disease and gets a grant from the pharmaceutical company that manufactures the drug in question. Similarly, there are those in the discipline of economics that have, from time to time criticized any regulation of finance industry, produced reports that were favorable to the companies that sponsored them. And yet, these individuals in the teaching profession felt that there was no need to disclose the potential conflict. For example, in 2006, Prof. Frederic Mishkin of Columbia Business School co-authored a report called “Financial Stability in Iceland”. The report maintained that Iceland’s economic fundamentals were strong. The report was commissioned by the Icelandic Chamber of Commerce in response to critical coverage of the Icelandic economy and certain Icelandic companies in the international business media. Mishkin was paid $124,000 to co-author the report. In another example, Glenn Hubbard, the Dean of Columbia School of Business, refuses to disclose which companies use his services and that he receives income from. And these guys are in the teaching profession, who we are supposed to look up to.
Regulation of Wall Street’s Reckless Behavior – Obama, Bush - They are all the same: Despite all the verbal bashing that Wall Street received from Obama or Bush, neither of them did hardly anything to make Wall Street more accountable. And how could they. For example, Obama, who promised Wall Street cleanup hired a bunch of guys that used to eat and sleep on Wall Street. Timothy Geithner was the President of Federal Reserve of New York. Larry Summers has deep financial connections to Wall Street and was the Director of National Economic Council until recently.
In the financial world, derivatives caused perhaps the most damage. Yet, trading of derivatives remains unregulated. Ask Larry Summers on the record, if he supports regulation of Wall Street. Where is the regulation on executive compensation for the financial companies? End of the day – no matter which party comes to power, the lobbyists will buy ‘em all. Apparently, there are 3,000+ Wall Street lobbyists for 600+ members of the Congress. Wall Street is where all the money is and we know that money speaks. Unless, there is a strong leader like Lincoln, Roosevelt or Eisenhower that calls the shots and is not intimidated to do what is morally right. The ultimate victim of the Wall Street excesses is the middle class. And no, I am not a Communist.
