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Money, Power and Wall Street

April 24, 2012

I’ve just viewed parts one and two of four in the PBS Frontline series.

From Mark Gongloff at HuffPo:

It reminds us that, contrary to the slackjawed expressions of disbelief by regulators and Wall Street chieftains that they could not possibly have known this could all go horribly wrong, there were plenty of warnings along the way. Even in typically clueless Congress, then-Senator Byron Dorgan (D-N.D.) warned in a 1999 speech that credit derivatives, “one day, with a thud, will wake everyone up.”

Hopefully the last two hours of the Frontline series will focus on how little has really changed since Dorgan’s warning. The banks, having been bailed out with no requirements that they change their ways, are bigger now than they ever have been. Derivatives are still under-regulated, and the banks are lobbying as hard as they can to keep them that way, while trying to roll back whatever other regulations they can spend money to defeat. And they seem to be winning.

Of course, by now we are in much greater debt, and thus the specters of currency devaluation and inflation loom larger. Through the IMF, we’ve backstopped trillions of Euro debt and collateral for derivatives there have since been consigned to bank depositors. With the blow up of MF Global, we’ve learned that brokerage accounts are hypothecated and subject to being seized in bankruptcy. Nearly a trillion dollars has been spent by the Fed to prop up the stock market, which continues to suffer record low volume, high correlation and inability to perform price discovery due to high frequency trading, naked shorts, insider trading and dark pools.

If you enjoy scary movies, there is none greater.

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