The Wall Street Reform That Wasn't

There was lots of talk in the mainstream media about how the recent financial markets reform passed by Congress was the "most sweeping change" of the financial regulatory system since the Great Depression.

What a crock...it was nothing more than window dressing.

The real sweeping change to our financial system took place over the past 20 years as Wall Street money became more and more influential in Congress.

The key piece of Depression-era financial legislation - the Glass-Steagall Act - was repealed in 1999.....

Next was the Commodities and Futures Modernization Act of 2000, pushed by Larry Summers and Robert Rubin, which legalized the most destructive financial instruments of all - derivatives.

Then there was the leverage exemption at the Securities and Exchange Commission (SEC) in 2004, asked for personally by Hank Paulson and his friends. This allowed Wall Street to turn into a casino where the gamblers could make 50-1, 100-1 bets and worse.

The new legislation fixes NONE of the major problems.....

Banks are still too big to fail...and continue to gamble with YOUR money.

Banks are still allowed to value assets and liabilities in what can only be kindly be called "mark to mythical valuations". They can also still use off-balance sheet accounting to make sure they give themselves stratospheric bonuses. All of these shenanigans continue to leave the taxpayers on the hook.

Banks are still getting trillions of dollars from the Federal Reserve and the mortgage agencies - Fannie and Freddie - again paid for by the taxpayers.

We still have the supposedly unbiased ratings agencies working for, and paid almost entirely by, Wall Street firms. In addition, the regulatory agencies which are supposed to be overseeing Wall Street still have a cozy relationship with it.

A wonderful example of this is the former chairman of the board of directors of the New York Federal Reserve Bank, which directly oversees Wall Street, Stephen Freidman. At the time, he was also a member of Goldman Sachs' board of directors.

In late 2008 the Federal Reserve ordered AIG to pay Goldman Sachs $13 billion. This controversial decision pushed AIG to the brink and taxpayers are still paying the tab for AIG's problems. At the same time, Mr. Freidman bought 37,000 shares of Goldman Sachs stock. No conflict of interest there, right?

What is a real pity is that Congress, unlike the Congress in the 1930s, did not have the guts to stand up to Wall Street and enact true financial reform.