martedì 27 marzo 2012
Designing a Blueprint for Accountability
If you live in the Washington-Wall Street power corridor, what do you think is the essential first task to reviving the economy? Repealing some of the very few protections against fraud in the market that were put in place after the multiple crises of the past decade. Only in the Washington, D.C. echo chamber -- the same one that brought you the deregulatory spasm that led to the bubbles and inevitable crises in the first place -- could repealing these protections be seen as a step to reviving a moribund economy. Even as the Volcker Rule -- the single most important element of the minimalist reform agenda that was approved -- is being killed through death by a thousand cuts, the voices of entrenched Wall Street have succeeded in turning back the clock.
The root causes of Wall Street's violations are really quite simple to catalogue: conflicts of interest built into business models that promote violations of fiduciary obligation; easy access to "OPM" -- other people's money -- coupled with fee structures that reward selling bad products because others are left holding all the down side risk; and the certainty that institutions that are too big to fail will get bailed out when things really get tough, again insuring the socialization of risk while gains are privatized and held by the fortunate few who are properly situated to take advantage of the aforementioned conflicts and fee structures.
The almost fraudulently named JOBS bill -- passed last week in a rare showing of bi-partisan fervor -- perpetuated all of these problems, recognized none of them as structural issues to be dealt with, and once again left the investing public with the mere cold assurance that we shouldn't worry: Wall Street has learned its lesson and would not repeat its prior errors.
Some of the targets of the bill's repeal were somewhat personal to me: it was while I was Attorney General of NY that I had sought and obtained the structural separation of underwriting and analytical work for IPO's and other offerings. This was an absolutely necessary step to bring even a modicum of honesty back to the world where investors were being sold stocks with all sorts of false assurances about the quality of the company. That Congress could repeal many of these protections for a significant percentage of new offerings without having a serious conversation about the impact on the broader integrity of the capital markets is astonishing. That so many Democrats and the White House would go along suggests a simple brain freeze when it comes to an understanding of what ails the capital markets.
Those who still think that excess regulation caused the housing bubble and led IPO's to migrate to Europe and Asia are in serious denial. The macro-economic issues leading to vigorous growth in much of the world while we see relative stagnation here must be tended to -- through serious investment in educations and R&D, serious enforcement of our trade treaties, and a raft of other policies that are tough and require genuine sacrifice. Simply passing a bill designed by the Chamber of Commerce and the banks is a cheap move to appease donors and those whose economic theories have been proven wrong at every turn over the past several decades. But that is, unfortunately, what we have come to expect.
Tonight I'll be part of a conversation about the economic crisis with Matt Taibbi (Rolling Stone), Pulitzer Prize-winning author Ron Suskind, Van Jones, Heather McGhee and OWS activist Jesse LaGreca.
Blueprint.fora.tv - Live Stream LINK at 7:00 EDT Tuesday March 27th, 2012
Tickets are still available if you are in D.C.: Email: email@example.com or call Lannan Center at (202) 687-6294 to reserve your complimentary seats to this event.