Frank Rich argues that little has been done to reform the financial system which continues to enjoy the fruits of the bailout:
The first stab at corrective legislation emerging from Barney Frank’s Financial Services Committee in the House is porous. While unregulated derivatives remain the biggest potential systemic threat to the world’s economy, Frank said that “the great majority” of businesses that use derivatives would not be covered under his committee’s much-amended bill. It’s also an open question whether the administration’s proposed consumer agency to protect Americans from mortgage and credit-card outrages will survive the banking lobby’s attempts to eviscerate it. As that bill stands now, more than 98 percent of America’s banks — mainly community banks, representing 20 percent of deposits — would be shielded from the new agency’s supervision.
If it’s too early to pronounce these embryonic efforts at financial reform a failure, it’s hard to muster great hope. As the economics commentator Jeff Madrick points out in The New York Review of Books, the American public is still owed “a clear account of the financial events of the last two years and of who, if anyone, is seriously to blame.” Without that, there will be neither the comprehensive policy framework nor the political will to change anything.
The only investigation in town is a bipartisan Financial Crisis Inquiry Commission created by Congress in May. It is still hiring staff. Its 10 members are dispersed throughout the country, and, according to a spokeswoman, have contemplated only a half-dozen public sessions over the next year. Such a panel, led by the former California state treasurer Phil Angelides, seems highly unlikely to match Congress’s Depression-era Pecora commission. That investigation was driven by a prosecutor whose relentless fact-finding riveted the country and gave birth to the Securities and Exchange Commission, among other New Deal reforms. Last week, we learned that the current S.E.C. has hired a former Goldman hand as the chief operating officer of its enforcement unit.
As with similar reform efforts, the collective strength of the affected interests make the efforts difficult. Goldman Sachs, Citigroup and JPMorgan may be the tail that wags the dog. This fits comfortably with our discussion of agency capture and iron triangles.
