In the continuing saga of “They Got Away With It,” the Volcker rule is in danger of being undone by the complexity larded onto it by the bank lobby. As the New York Times reports, the goal of prohibiting taxpayer-backed banks from trading on their own accounts, instead became something where “bank lobbyists with complicit regulators and legislators took a simple concept and bloated it into a 530-page monstrosity of hopeless complexity and vagueness.”
The report goes on:
They couldn’t kill the rule. Instead, they are getting Congress and regulators to render it morbidly obese and bedridden. Of course, that is no accident. The biggest banks, which are in business today only because taxpayers bailed them out, want to protect their valuable franchises.
So much for the supposed power of Occupy Wall Street. It’s nothing compared with the more than $400 million the banking industry spent on lobbying last year. This is your money, by the way, via the bailout of the “financial services” sector in the wake of the collapse its risky swindles brought on in 2008.
I have a modest proposal: Reinstate Glass-Steagall. The Depression-era law that separated risky investment banking from dull commercial banking kept the financial system safe for decades. The act was 37 pages long (Dodd-Frank is more than 2,300 pages). In addition, break up the too-big-to-fail institutions; they are too big to exist. Prohibit most derivatives and such dodgy moves as the securitization of mortgages and credit default swaps. Tax investment banker compensation at Eisenhower rates (90 percent-plus). And begin aggressive criminal prosecution of the top bankers who brought on the Great Recession.
Happy now, Wall Street? Most of our problems are highly complex with a variety of unintended consequences possible from reform. This isn’t one of them. If it doesn’t happen, it will be yet another sign that our politics are not broken but fixed, both parties are owned by the plutocrats, the rule of law has been fatally subverted and your vote means nothing.
And Don’t Miss: Too big to jail: Mortgage settlement suckers || Simon Johnson/Project Syndicate
Today’s Econ Haiku:
Debt keeps resetting
So does austerity’s pain
So Europe’s not fixed