Changing the Rules?

Far from it when it comes to the financial markets. Here's a quote from Elizabeth Warren, the chair of the Congressional Oversight Panel on the Tarp,

"The rules that got us into this financial crisis have not yet been changed. The too-big-to-fail institutions are bigger, the banking industry is more concentrated and the toxic assets remain on the books of the banks. Worse yet, the implicit government guarantee that let big companies take on high risks, then keep all the rewards if they succeed and get taxpayer bailouts when they failed, are even stronger than they were a year ago."

She added, "In other words, we are now operating under a set of rules that have proven to be disastrous, but we have not changed them."

And then, Bill Black, who helped resolve the S&L crisis, notes

"We're putting in place much more severely perverse incentives: There's the endorsement of ‘too big to fail’; and the gaming of accounting rules so they don't recognize the losses of lenders - and regulators can't prove that they should be shut down."

We seem to be quickly moving back to a world of excessive risk, some of which is fueled by our low interest rates which enable speculators to borrow low here and invest at higher rates overseas. Each week seems to produce another article about another bubble being pumped up.

What are our leaders doing about it? We still don't require TARP recipients to actually lend money. We still allow banks to inflate the value of toxic assets. We are still too skittish to accept that some banks will fail and should fail. We are more willing to accept 10+% unemployment than to do something about our banking system. It's a cliche but we care more about Wall Street than Main Street.