In his primetime address on Wednesday, President Obama bookended the two mid-September anniversaries that define this era — 13 years since 9/11 and 6 years since the fall of Lehman Brothers, signifying the financial crisis. The debate over how to best fight terrorism and how to best prevent future Wall Street collapses share a common thread, at least according to critics: Policymakers have mostly tried to look busy for the purposes of public image, rather than addressing the root causes of the events.
I’ll leave the foreign policy debate to those better equipped to discuss it, but let’s take financial reform. Though Congress passed Dodd-Frank in 2010, and regulators have written rules ever since (only completing about 55 percent of them more than four years later), the massively complex law has failed to fully contain Wall Street’s predilection for threatening the economy.
The biggest banks remain too big to competently manage their affairs and too interconnected to be safely dissolved in the event of collapse, as the recent rejection of their “living wills” showed. Wall Street continues to amass outsized risk. Sales of securitized loans based on corporate debt are at a post-crisis high, and protections for investors for these loans have completely broken down. A recent academic study of the Volcker rule, the signature Dodd-Frank provision to eliminate proprietary trading at deposit-taking banks, found that affected banks have taken on more risk and carried less liquid assets than before the rule’s enactment.
Financial Times columnist Martin Wolf lays the problem at the feet of Dodd-Frank itself, a sprawling document that employs 30,000 pages of rules to merely preserve the existing system. “If we want everything to stay the same, everything must change,” Wolf writes, quoting a character from the Italian epic
The Leopard.
If you focus only on one area where regulators have taken significant steps of late, you could actually manage a cheer. Bolstered by a rough consensus that transcends party ideology, and a persistent intellectual force from outside the Beltway, regulators have appeared to agree that if they cannot eliminate financial risk they can at least make it more likely that banks, not taxpayers, will pay to clean up the aftermath.
I
n his primetime address recently, President Obama bookended the two
mid-September anniversaries that define this era — 13 years since 9/11
and 6 years since the fall of Lehman Brothers, signifying the financial
crisis.
The debate over how to best fight terrorism and how to best
prevent future Wall Street collapses share a common thread, at least
according to critics: Policymakers have mostly tried to look busy for
the purposes of public image, rather than addressing the root causes of
the events.
I’ll leave the foreign policy debate to those better
equipped to discuss it, but let’s take financial reform. Though Congress
passed Dodd-Frank in 2010, and regulators have written rules ever since
(only completing of them more than four years later), the massively complex law has
failed to fully contain Wall Street’s predilection for threatening the
economy.
/Six-Years-After-Lehman-s-Bankruptcy-Wall-Street-Reckless-Anniversarys that define this era — 13 years since 9/11 and 6 years since the fall of Lehman Brothers, signifying the financial crisis.
The debate over how to best fight terrorism and how to best prevent future Wall Street collapses share a common thread, at least according to critics: Policymakers have mostly tried to look busy for the purposes of public image, rather than addressing the root causes of the events.
I’ll leave the foreign policy debate to those better equipped to discuss it, but let’s take financial reform.
Though Congress passed Dodd-Frank in 2010, and regulators have written rules ever since (only completing about 55 percent of them more than four years later), the massively complex law has failed to fully contain Wall Street’s predilection for threatening the economy.
The biggest banks remain too big to competently manage their affairs and too interconnected to be safely dissolved in the event of collapse, as the recent rejection of their “living wills” showed. Wall Street continues to amass outsized risk. Sales of securitized loans based on corporate debt are at a post-crisis high, and protections for investors for these loans have completely broken down. A recent academic study of the Volcker rule, the signature Dodd-Frank provision to eliminate proprietary trading at deposit-taking banks, found that affected banks have taken on more risk and carried less liquid assets than before the rule’s enactment.
Financial Times columnist Martin Wolf lays the problem at the feet of Dodd-Frank itself, a sprawling document that employs 30,000 pages of rules to merely preserve the existing system. “If we want everything to stay the same, everything must change,” Wolf writes, quoting a character from the Italian epic The Leopard.
If you focus only on one area where regulators have taken significant steps of late, you could actually manage a cheer. Bolstered by a rough consensus that transcends party ideology, and a persistent intellectual force from outside the Beltway, regulators have appeared to agree that if they cannot eliminate financial risk they can at least make it more likely that banks, not taxpayers, will pay to clean up the aftermath.
Read more: Six Years After Lehman’s Bankruptcy, Wall Street Is as Reckless as Ever | The Fiscal Times
