Risky Business

Sep 24, 09 Risky Business
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The crisis that almost brought about the fall of civilization as we know was started by unscrupulous Wall Street bankers and brokers who knew that any risk they incurred would be passed on to somebody else.

After the federal government stepped in and prevented a financial catastrophe, many observers believed that a new, sobered Wall Street would emerge.  They were wrong.  The financial sector is averse to changing their risky, yet profitable, behavior.

Only a few months removed from the abyss, Wall Street has returned to business as usual.  Congress passed weak regulations and banks made nominal changes.

Yet, pay scales have almost returned to 2008 levels on the heels of substantial stock market gains.  As the money again flows into coffers bolstered by billions of taxpayer dollars, it becomes ever harder to institute substantive changes.

Regulating executive pay, the derivatives markets, and forcing banks to carry more leverage are still no-starters in Congress.

Many economists believe that a larger crisis looms on the horizon because bankers are playing recklessly; only this time they are gambling with billions of taxpayer dollars.

Even bankers are surprised at the lack of oversight from the federal government.  Many believed that not only punitive regulations, in the form of

Because Wall Street thrives off aggression and competition, just because the climate changes does not mean that the culture has changed.  Arguably, it has become worse.

An even more virulent form of arrogance has crept into the banking sector.  After the government bailed out the bankers, many of them no longer believe that the government will let their institutions fail.

It is the equivalent of going to a casino and having someone with unlimited funds back you.  By the way, this backer doesn’t collect whether you win or lose.

With such lucrative financial gains at stake, and a pool of money to finance risky endeavors, why would anyone be concerned about anything other than their own bottom line?

This problem is much more serious than punishing some bankers for their colossal mismanagement of the economy.  Without government intervention and regulation, we will be digging ourselves out of a depression soon rather than later.

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