Tariffs as a Negotiating Tactic: Undercut by Wall Street Expediency

With all the economic and political turmoil from the anticipated American tariffs, it may be tempting, especially for financially-oriented CEOs and billionaires looking at quarterly reports, to call the whole thing off even though doing so would deflate the American attempt to renegotiate trade bilaterally with other countries. The concerns of the wealthy, whether corporations or individuals, have their place, but arguably should not be allowed to "lead the proverbial dog from behind, lest the dog run in circles and get nowhere." Moreover, the notion that any goal that is difficult and takes some time to materialize can or even should be vetoed by momentary passions at the outset is problematic and short-sighted. That U.S. President Trump's announcement of bilateral tariffs quickly brought fifty countries to the negotiating table is significant as a good sign for the United States, as long as that country's powerful business plutocracy (i.e., private concentrations of wealth that seek to govern) can be kept from vetoing the emergent trade policy, which at least in part is oriented to trade negotiation and ultimately to the notion that fair trade is conducive to increased free trade. 

The full essay is at "Tariffs as a Negotiating Tactic."

On the Reputational Capital of a Business Leader on a Societal Stage

Is it better that companies be publicly or privately held? Such a question is of such magnitude that glossy, simplistic answers should be eschewed. This is not to say that the answer is situational in nature. Rather, it is more likely that each comes with pluses and minuses from the perspective of an economic system as a whole. As business “leaders” give their advice, it is important to keep in mind whether any personal or institutional conflicts of interest exist and thus could warp the space itself of the advice. Yes, I am intimating Einstein’s theory of general relativity here. Rather than provide an answer without having studied the matter sufficiently, I will provide a way to look at the advice given by Jamie Dimon, CEO of JPMorgan Chase.

The full essay is at "Reputational Capital of a Business Leader."

Do Police Departments Unwittingly Attract an Aggressive Mentality?

Might the personality type most excited by inflicting pain on others be drawn to “serve” on a police force?  Might force itself be an allurement to such a personality? Moreover, might organizations populated by the personality be inclined to set up defenses against being held accountable either internally or by other organizations? At the very least, deference ought to go to the victims rather than the “officers.”

The New York City police department and the district attorney’s office set investigations in motion after video surfaced of Anthony Bologna of the police department using pepper spray against protesters of Wall Street greed and the lack of accountability there. Even as the department’s own investigation was yet to commence, the chief publically questioned whether the video offered enough context to evaluate the inspector’s actions. To the chief, merely protesting in a way that blocked traffic justifies the use of pepper spray without warning. The inspector’s union boss claimed the motive had been to restore order—though the video shows that the victims were not disorderly or resisting arrest. Indeed, the police did not attempt to arrest those sprayed. It is not difficult to see where the police investigation of its own will go.

Beyond the hypocrisy involved in those sworn to protect actually attacking and the anti-Americanism involved in trying to curtail a protest, it might reasonably be asked whether Bologna was acting on his own, or whether Wall Street money was ultimately behind the aggression. In the protest’s first four days, the mega media companies scarcely covered the protest; Bologna’s unprovoked aggression came after the news networks could no longer viably ignore the movement. So was the case simply that of American banks using the police state to keep a movement from spreading to their detriment? Were there actual accountability on Bologna, might the bird sing, affording us some transparency concerning any such hidden relationships?

Even if no such conspiracy existed, there is obviously a need for stronger instruments of accountability that could be imposed externally on police departments and their employees. In the wake of Bologna’s attacks, the media reported that such incidents are not uncommon. Indeed, I have witnessed them. While in Pittsburgh, for example, I witnessed how the police treated black teenagers who were simply walking along the sidewalks in the university area of town (Oakland). It was evident to me at the time (as a bystander leaving a restaurant) that the police employees believed they did not face any meaningful accountability. So I was not surprised to see video surface of Anthony Bologna’s sadism on full display in New York.

Thomas Hobbes writes that in the state of nature, and even in society, each person has the right to protect his or her person, as per the right of self-preservation. A sovereign cannot take this inalienable right away. When Bologna acted outside of the law, and thus outside of the social contract, his victims had the right to defend themselves, even in using pepper spray against the attacker. In other words, Bologna could and should have been treated as a criminal attacker by his victims and bystanders. Perhaps in the future protestors ought to carry pepper spray in case any criminals show up and attempt any aggressive attacks. It could be that the offending attackers are imprisoned while the self-preserving protestors are exonerated. Then maybe police departments will recognize that accountability applied to their own employees is in the departments’ interest. Legitimate force goes only so far before it lapses into criminality, and we all have an obligation as citizens to thwart crime as it is happening by whomever. If police employees do not want other citizens to be put in the position of making this judgment, then perhaps those employees might want to reassess their attitude and habits. In the meantime, citizens need to be on guard against criminals even and especially where they are least expected and perhaps most commonly found.

Source:

Al Baker and Joseph Goldstein, “Officer’s Pepper-Spraying of Protesters Is Under Investigation,” New York Times, September 29, 2011. 

Bank Bonuses and Dividends After the Financial Crisis: On the Power of Banks in European and American Government and Society

Dividends are typically based on how much a bank (or company, moreover) has profited, less whatever capital is needed from the profit. Similarly, bonuses are based, at least theoretically, on how the managers and the nonsupervisory employees alike perform as well as how the bank performs. In their respective ways of shoring up banks amid the financial crisis of 2008, the E.U. and U.S. differed on how easy it would be for banks to pay dividends and bonuses, as well as to have access to governmental funding. These differences reflect both the relative power of the financial sector in the governmental sector and the cultural attitudes toward business. 

“Under proposals outlined by the European Commission president, José Manuel Barroso, banks would be required to temporarily bolster their protection against losses. . . . Extra capital for European banks should be raised first from the private sector, then from [the state] governments, according to the proposal. Only when those avenues have been exhausted should a euro zone bailout fund be tapped, it said. Banks should not be allowed to pay dividends or bonuses until they have raised the additional capital, according to the proposal.”[1] The bankers much raise additional capital before government coffers could be tapped and dividends and bonuses could be paid.

 
As an aside, the nature of the E.U.'s federal system is also relevant, as state funds would be tapped; only when they are exhausted would a federal fund be used. In the case of the U.S., the states were to be shut out of the solution. This reflects the more general shift from federalism to consolidated power at the federal level. The European federal system was at the time more balanced, and thus more viable.

After Lehman Brothers went under in September 2008, the U.S. Government took “swift action to ensure its banks had a strong cushion of capital.”[2] The banks first (rather than last) resort of capital would come from the Federal Reserve Bank (as created money) and TARP funds enacted by Congress. The bankers did not have to raise additional funds, and they could pay dividends and bonuses even though the government bailout was supposed to be used to expand lending, which largely didn't happen. The banks could take the governmental funds with few if any strings attached. Also, the U.S. Treasury allowed banks to pay back the funds earlier than perhaps advisable because the bankers wanted to be free to pay whatever bonuses they saw fit for themselves.

The difference on whether dividends and bonuses should be allowed at troubled banks reflects a rather basic ideological difference between the E.U. and U.S. concerning whether economic liberty ought to be limited even in cases in which the economic entities are culpable. In short, is a bank (or business) whose management has performed very badly, as in recklessly taking on too much debt, justified in paying out dividends and especially bonuses nonetheless? If traders knowingly sell crap to even their best customers, as traders at Goldman Sachs did in the case of the subprime-mortgage-based financial-derivative bonds, should those traders expect to get bonuses anyway? Competence and ethics are thus both relevant. 

Admittedly, the bonus system on Wall Street had made its way into calculations of standard or basic compensation, such that the bankers had come to expect at least some bonus each year, regardless of performance. However, this expecation (and practice) contorts the very meaning of a bonus; it is not to be expected because it is granted for good or excellent performance, or even ethical conduct. U.S. officials tacitly bought into Wall Street's convenient notion of a bonus, whereas E.U. officials held onto the basic fact that a bonus is an extra, not a given, and, moreover, that raising additional capital as a hedge against systemic risk is more important than bonuses (and dividends). 

I suspect that because the E.U., at the time at least, had major parties on a broader political spectrum than that of the U.S., the financial sector did not have as much power over governmental institutions as in the case of the United States. Put another way, the U.S. political landscape was more tilted in favor of the financial system. Goldman Sachs, for instance, gave $1 million to Barak Obama's 2008 presidential campaign. Furthermore, the U.S. Supreme Court ruled in Citizens United (2010) that corporations could give unlimited amounts of money to political campaigns. Meanwhile, the "hard left" was represented only by "liberal Democrats," whose power has been typically diluted in the Democratic Party. Even the liberal wing of the Democratic Party does not reach the Left parties in Europe in terms of Socialism, for example. 

Therefore, I submit that the interests of corporations, including their stockholders and managements, are distended in American politics. Perhaps not by coincidence, the culture itself is amenable to business. For example, business values have gained a greater footing in how education is conceptualized at many universities in the American States. Since 1980, for example, both universities and students have reduced education to vocation in assessing a major's worth in terms of its potential for resulting in a good-paying job. The criteria for higher education are not so limited, or warped. In terms of teaching, corporate power-point presentations, which were ubiquious in business settings, became more common not only in "teaching by bullet-points," but also in what students would study for exams. 

The cultural value of business in American society, combined with the monied/political power of corporations (including banks) in the halls of government can explain why the American response to the incompetent bankers differed so much from the European response. This is a good case study particularly because it is ludicrous that a no-strings governmental response would follow the bankers' pathetic abuse of the subprime derivative bonds. The sector had even lobbied to keep financial derivatives from being regulated! That bonus were granted attests not only to warped judgment, but to the cultural and political situs of the financial sector in America. I suspect that many Europeans, even E.U. officials, were shaking their heads in disbelief. 

1. Stephen Castle, “Europe Tells Its Banks to Raise New Capital,” The New York Times, October 13, 2011.
2. Ibid.

The Italian Election in 2013 Excessively Roiled Markets

With no party having gained sufficient seats in the upper house of the Italian legislature, analysts warned on February 25, 2013 of a “hung parliament,” which would make it even more difficult for structural and fiscal reforms to be passed. Even though the Democratic Party appeared to have gained a slim victory in the lower house, giving that party the majority of 340 seats out of 630, the upper and lower houses have equal law-making ability so even the possibility of a hung parliament roiled markets. I contend that this is yet another case of financial analysts over-reacting to political uncertainty. 

“It was the worst possible outcome, feared by market participants and European policy-makers alike. Italy is facing Greek-style political gridlock and possibly new elections,” Tobias Blattner said at Daiwa Capital Markets.[1] The Wall Street Journal observed at the time, “Italy’s growth prospects are tepid at best, and the election result demonstrates in spades that its fractious politics has not been masters.”[2] Generally speaking, the parties protesting the fiscal reforms demanded by the E.U. did well, suggesting that Italy could find itself at odds with the federal government in how to resolve the state’s debt crisis.

Italy’s bench market index, the FTSE MIB, traded down 4.62 percent on February 26^th and the euro sank close to a seven-week low against the dollar, trading at $1.31. Yields on 10-year Italian bonds jumped 0.45 percentage point to 4.81 percent. Bonds of Spain, Portugal and Greece were hit too. In America, the Dow fell nearly 300 points on February 25^th, the market’s worst day in almost four months. Markets in the E.U. were down around 2 percent, but futures indexes there and in the U.S. were up the following day.[3]

The optimistic showing of the futures indexes on the day after the election hints that the market on both sides of the Atlantic over-reacted to the anticipated gridlock and possible new election. To an extent, the results are within the range of what can be expected from a multi-party system of parliamentary democracy. Indeed, the states of Britain and Germany had had to form coalition governments just a few years before, and even the problematic Greek elections ended with a government. In fact, that government ended up ratifying the additional austerity.

Moreover, the immediate reaction of the markets seems antiquated to me in the sense that market participants had not adjusted their mindsets to the contemporary European context. In particular, the participants treated Italy as though it were a sovereign state, rather than a state in the E.U. There being a federal level mitigates the importance of state elections even though the states hold more power in the E.U. than the American states hold in the United States. Put another way, the E.U. would surely pressure Italian officials to end the gridlock. Even if the resulting state government were antagonistic to the austerity approach, negotiations would doubtless occur between the state and federal levels. The result would not be as stark or extreme as perhaps market participants presumed in their immediate reactions to the news.

Moreover, such overreactions to political instability may also be due to a projection of relative business certainty onto political turf, which is inherently uncertain even though engrained institutions and constitutions can buffer the turbulence as political dynamics naturally shift and even erupt. Business analysts and investors used to being able to hedge financial and market risk inhabit the business world, which generally does not produce such instability as does the world of politics. In other words, a legislature is generally more rambunctious than is a corporate board meeting. Uncertainty is even in just looking at that other world, as it is so different. This uncertainty, plus novice judgement in political affairs, can explain why political risk analysis may overstate political uncertainty even though it is more than business uncertainty.

1. Charles Forelle, “Italian Election Outcome Sparks Selloff,” The Wall Street Journal, February 26, 2013.

2. Ibid.

3. Alessandra Galloni and Giada Zampano, “Messy Italian Election Shakes World Markets,” Febraury 26, 2013; Katy Barnato, “US Stock Futures Rebound; Italy, Bernanke in Focus,” cnbc.com, February 26, 2013.

Goldman Sachs' Revolving Door: Regulatory Capture

In July 2012, Andrew Williams, a former spokesman for U.S. Treasury Secretary Timothy Geithner, announced plans to head over to Goldman Sachs at the end of that month.[1] Williams was the second of the Secretary’s spokesmen to head to theWall Street bank. Such moves may reflect a standing policy at the bank to have a revolving door. The previous U.S. Treasury Secretary, Henry Paulson, had been the CEO at Goldman. This suggests that the revolving door was to include populating high offices in government, presumably not out of a sense of civic duty, but, rather, to see that Goldman's interests would be protected and even promoted through public policy. Hence President Obama was said to have had a Wall Street government with respect to positions bearing on Wall Street. I submit that deconstructing such a revolving door would be very difficult. 

From the standpoint of a government official being hired by Goldman, the prospect of becoming wealthy is a large incentive to make the jump. Such an official would typically have scruples about using his contacts in government to pull strings for the bank. Mired in scandal following the financial crisis of 2008, Goldman’s leadership no doubt understood the value in hiring good PR men. Such hires could even put a good face on the cozy relationship between the bank and people still in government.

The “revolving door” dynamic is also difficult to break up because it contributes toward the capture of regulators by the regulated. This is known as regulatory capture. The regulated companies supply information that regulators need in order to devise regulations; the companies can use this reliance to their advantage even just in providing tainted, self-serving data. Moreover, the revolving door can make it easier for the managements of the regulated companies to get even high government officials to put political pressure on the regulatory agencies to go soft on regulating. In the case of Goldman Sachs, it is reasonable to expect that Henry Paulson would have bent to the bank's request for lax regulatory oversight from the SEC, which of course had no idea how many subprime-mortgage-derivative bonds Wall Street had been producing and selling up to the financial crisis of 2008. 

 

The SEC can be soft on Wall Street and point to insufficient staffing as the reason, while the reality is far more sordid in terms of the relationship between the regulators and the powerful regulated. 

Legislated restrictions on former government financial officials going to Wall Street banks could of course be circumvented, given the incentives described above, though prohibiting employment (or financial enrichment, such as by consulting) in the industries related to an official's area for many years seems possible. Even if Goldman Sachs could not hire away Treasury or SEC offiicals, the bank could still count on ex-Goldman folks who occupy key offices in the U.S. Government. 

Generally speaking, the financial and related political power of such huge aggregations of wealth such as a Wall Street bank has (and is) naturally overpower weak governments, by which I mean governments that depend on or do not have the will to resist the allure of money (or threats) from entities subject to the government. A government whose elected officials must rely on large sums of donated money just to get reelected is ripe for succumbing to corporate offers with strings attached. A strong government is insulated, whether by law, will, or power generally from such strings. A government that has many points of access (of influence) is likely to be weak in not only rebuffing pressure to reduce taxes and spend more, but also standing up to large corporations. A government in a pro-business society is likely to be weak with respect to the power of business, other things equal. Even more significant than these variables, however, is the tenuous basis of representative democracy amid Wall Street bewindowed towers. 

1. Bonnie Kavoussi, “Andrew Williams, Ex-Treasury Spokesman,Headed to Goldman Sachs,” The Huffington Post, July 12, 2012. 

Members of Congress Secretly Lobbied the Fed

As of late September 2012, more than one hundred members of Congress had lobbied the Federal Reserve and other regulatory agencies on the Volcker Rule, the part of the Dodd-Frank Financial Reform Act of 2010 that prohibits banks from operating like casinos (e.g., trading with proprietary funds, rather than those of customers).[1] The rule stems from the importance of banks in our financial system. In September 2008, the world nearly witnessed the collapse of that system when banks stopped trusting each other (e.g., via commercial paper market) because of the risks that some of the big ones had been taking with mortgage-backed derivative securities and the related insurance swap securities. Awash in healthy-seeming fees, the banks purchased risky subprime mortgages and bundled them into bond-like securities that could be sold to investors.
Congress passed the Dodd-Frank Act, so it makes sense, and indeed is positive from the standpoint of accountability, that lawmakers remain involve as the relevant regulators (who are not elected) translate the broad legislative language into specific rules for banks. However, the newspaper’s report points to a less-than-salubrious practice wherein members of Congress contact regulatory agencies in private and before even the period for public comment. This raises the possibility that Wall Street was using its connections in Congress to weaken the public safeguards in the bill—essentially putting a narrow private interest in front of the public interest that the bill was designed to protect.

The access purchased comes not only from having information that the regulatory agencies need; banks (and American corporations in general) could contribute unlimited amounts of money from the corporate treasury (rather than from contributions from executives and employees) to “social welfare” non-profit organizations that can spend money on political ads in support of friendly candidates (and against their opponents) without having to divulge the identities of the donors. So Wall Street banks can furtively promote U.S. Senate candidates who support the repeal of the Dodd-Frank Act without any of us knowing it. In fact, the “social welfare” (54c) groups can in turn contribute directly to a candidate’s campaign without divulging the names of the donors. Not even the IRS, which has been concerned about whether the donors pay the required gift tax, bothers the “social welfare” organizations for donor lists after complaints from several U.S. Senators. Nor has the SEC pushed corporations to divulge to their respective stockholders how the political donations have been spent. I suspect that senatorial influence lies behind this inaction too.
It is not as though there were some uncertainty regarding the need for disclosure in a democracy. Even though eight of the nine U.S. Supreme Court justices in Citizens United stress in their opinions the necessity of disclosure, corporations, no doubt well-connected in the halls of power in Washington from the donations already given, have a way to evade the transparency. Political and corporate democracy are both undercut as banks and business corporations can spend unlimited amounts (out of their respective profits) to help “pro-business” candidates for public office. Rather than being speech itself (and thus subject to free-speech constitutional protection), money is power that can be used to skew or otherwise limit the contours of public debate. After the election, the continued influence of the money is also stealth, such as when members of Congress lobby the Federal Reserve to weaken regulation meant to safeguard our financial system from a repeat of the near-collapse in 2008. For deregulation to be urged so soon after a near-depression gives us an indication of how dangerous “money as invisible speech” is to the public good, even if such influence is in the corporate interest.
As creatures of the state, corporations should not have a share in governance, for that function subverts the causal relationship between Creator and creature. That is to say, a corporate management (or board) presuming to influence members of Congress can be likened to the self-idolatry of a creature supposing itself to be God. Interestingly, as going concerns, corporations are immortal, legally speaking. As for us mere mortals, Rousseau reminds us that we are born free but live in chains—only we are under the delusion that we are still free because the confining elements are subterranean qua the furtive influence of great concentrations of private wealth. I suppose one question is whether finite bundles of subjectivity can somehow become aware of that which has been designed to be outside of our awareness, and, if so, whether a society can so move to protect its good in a viable republic.

1. Ben Protess, “Behind the Scenes, a Lawmaker Pushes to Curb the Volcker Rule,” The New York Times, September 21, 2012.

Is the U.S. Congress Too Beholden to the Financial Industry?

That financial deregulation had any traction at all following the financial crisis of 2008 in the U.S. is stunning, for the implication is that Wall Street money has tremendous influence in the U.S. Governent even after Wall Street banks have screwed up (even in triggering a financial crisis!). 

According to Gary Gensler, head of the Commodity Futures Trading Commission in 2012, Congress stood with the big banks in the struggle to shield Americans from the risks and excesses of Wall Street even after the financial crisis of 2008. He pointed in particular to a proposal from the U.S. House’s Appropriations Committee to cut his agency’s funding by 12 percent.[1] The CFTC had been given expanded powers by the Dodd-Frank Act in 2010. Doubtless the proposed budget-cut had something to do with that. It is astonishing that such a proposal would come in the wake of a financial crisis caused in large part by Wall Street bankers taking too many risks. That the agency was then tasked with regulating the problematic $700 trillion market on derivatives—a task that dwarfed the agency’s regulatory power over futures—suggests that the decision to cut the agency's budget after the financial crisis was especially agrevious, being based, I submit, in Wall Street's denial over its harmful role in triggering the financial crisis in which subprime-mortgage-based bond derivatives collapsed in value even as banks including Goldman Sachs were trying to unload the "crap" as good values. 

CFTC Chairman Gary Gensler staring down the big banks

That an industry with a vested interest in rolling back financial regulations could have any influence at all over elected representatives reflects the general ignorance or naivity concerning conflicts of interest. In a COI, a private interest predominates even if the good of the whole is being estolled. A bank-rolled member of Congress can used the espoused public-interest rationale advanced by the banking industry as cover to hide the cosy relationship. For example, a bank's public affairs department could put out the word that increased financial regulation, even after a financial crisis, is really socialism. The bank-rolled members of Congress could then use the socialism scare-tactic on their respective constituents while quietly accepting the large campaign-contributions from the banks. Meanwhile, the American people feel secure that such representatives are protecting them from a threat rather than enabling one.

1. Alexader Eichler, “CFTC Head Gary Gensler: Congress ‘Sides With Wall Street’,” The Huffington Post, June 8, 2012. 

For more on the conflicts of interest in the financial sector (and others), see: Skip Worden, Institutional Conflicts of Interest, available at Amazon.

Stock Market Efficiency: Regulating Speed Trades

A flurry of international activity aimed at putting limitations on computer-based speed-trading was striking during the Fall of 2012 in the U.S. because regulators had been slow to act. Typically, the NYSE has been viewed by the world as the Mecca of efficient investment markets. Paradoxically, however, efficiency may be improved by restricting—meaning regulating—the masses of computer-enabled quick trades that take advantage of momentary microscopic arbitrage opportunities that are too quick for the human hand. The American conventional wisdom seems to be that regulation and market-efficiency are inversely related, rather than complementary. This assumption might be overly simplistic, coming from an inherited ideology. Fortunately, the rest of the world has not been following the SEC.

 A trader on the floor of the NYSE.   Getty Images

The broadest and fastest changes to unfettered speed-trading as of September 2012 were in Canada, where regulators had began increasing the fees charged to firms that flood the market with orders back in the spring of that year. According to the research and trading firm ITG, the change made trading more rather than less efficient because the crush of data burdening the market’s computer systems was reduced. Too much information coming all at once can be distinguished from perfect information, and can even overwhelm a market’s very infrastructure, eviscerating any possible gain from the additional information. For computer science folks, all this can be pretty sexy language; for the rest of us, the mundane fact of the matter is that more information does not always make a market more efficient. Exploiting small increments of arbitrage at a high volume so as to make a quick fortune may not actually improve a stock market’s efficiency because the market itself might crash. Regardless, any increase in the micro efficiency of the stock prices may not be significant, which is perhaps why such volume must be thrown at the problem to make enough money at the macro level.

Nevertheless, the SEC was proposing nothing to hamper the unfettered wild-west of computer trading. Meanwhile, Canadian trading desks were preparing for rules coming into effect on October 15, 2012 that would curtail the growth of the sophisticated trading venues known as dark pools, which the U.S. Government had allowed them to proliferate in the United States. To be sure, the Canadian rules had been hotly debated, but many Canadian bankers and investors determined that they did not want to go any further down the road that has taken the United States from having one major exchange in 2002 to having 13 official exchanges and dozens of dark pools in 2012. In the interim, trading firms and investors on Wall Street were hardest hit by a series of market disruptions, including the flash crash of 2010 and the runaway trading in August 2012 by Knight Capital that cost it $440 million in just hours.

What is striking about Canada is not so much that it was not following the SEC; rather, even the rules going into effect in mid-October were seen by some banks there as insufficient. “We don’t want to look like the U.S., but we have to do it better than we are now,” said Greg Mills, the head of stock trading at Canada’s largest bank, Royal Bank of Canada.[1] Major market participants urging the state to better protect the viability of the market itself through more regulation is a case of statesmanship, or a sort of enlightened self-interest that fuels principled leadership over opportunism in the short-run. To be sure, legislators and regulators should not depend on such “industry self-regulation,” but it is quite beneficial as a supplement. That is to say, the cart should not lead the horse, but it is nice when the cart voluntarily lessens the load.

In the “theory of regulation” literature, market participants urging more regulation are typically presumed to be invoking the comparative advantage of regulation. A bank that would benefit over its rivals if computer-trades were not allowed in such time-volume as they were in the U.S. as of 2012 is typically assumed to be the only player willing to advocate for more government. Admittedly, the strategic use of regulation is not lost on businesses invested in the profit-motive. Nevertheless, this motivation does not exclude the possibility that market participants may urge more regulation out of a realization that if the market freezes up or collapses even for a time, every participant suffers financially.

Perhaps business practitioners in the U.S. are missing not only the forest for the trees, but also the trees for the branches, and the legislators and regulators are following in suit—in part due to the shared perspective (as it is so subtle being everywhere) and in part due to the corporate campaign contributions and intense lobbying. That is to say, the limiting nature of a perspective, unknown to the holders, is as it were a common denominator that tacitly supports a corrosive plutocratic (i.e., rule by wealth) symbiotic relationship between business and government that undermines the system itself. That there are other systems, such as Canada, that are founded on a different set of assumptions can mean that the basic form of the American perspective, which would otherwise be invisible or taken as a given, can be seen, or at least finally glimpsed. From this transparency, the assumptions taken for granted can be put as a problem to be solved. 

1. Nathaniel Popper, “Beyond Wall St., Curbs on High Speed Trades Proceed,” The New York Times, September 28, 2012. 

Presidential Authority and Bureaucracy: Regulatory Agencies

Circulating in Congress in the fall of 2012 was a bill that would have allowed "the White House to second-guess major rules and mandate that agencies carefully study the economic effects of new regulation. The change could, in effect, delay a number of rules for the financial industry. Those who support preserving the status quo where Wall Street regulates itself will find much to like in this legislation," said Amit Narang, a regulatory policy advocate at Public Citizen, a nonprofit government watchdog group.[1] President Obama had received $1 million from Goldman Sachs as a campaign contribution in 2008. Yet of how much value to Wall Street is a mere delay in regulation? Some, surely, but not enough to make this the decisive issue here. Rather, I submit that the president's control as chief executive of the regulatory agencies and the added bureaucracy are more salient in this case study. 

In terms of Wall Street’s interest, the proposed bill would have permitted the White House only to delay proposed regulations until further explanation is provided; the president would not be able to veto them. The issue from this case can thus be said to be whether the U.S. president as the chief executive in the U.S. Government must have control over even independent agencies such as the SEC. To be tasked with the enforcement of U.S. law and yet not to have the right even to be consulted by agencies as varied as the FCC, the FDIC, the SEC and the CFTC puts the chief executive in a bind—that of constitutional responsibility without the requisite authority. 
At a much less significant level, the added bureaucracy could have been a problem, given how much bureaucracy was in the agencies themselves: “at the minimum a 13-point test for rule-making. That includes finding ‘available alternatives to direct regulation,’ evaluating the ‘costs and the benefits,’ drafting ‘each rule to be simple and easy to understand’ and periodically reviewing existing rules to make agencies ‘more effective or less burdensome.’”[2]

1. Ben Protess, “Lawmakers Push to Increase WhiteHouse Oversight of Financial Regulators,” The New York Times, September 10, 2012. 
2. Ibid.

President Obama Took Care of Wall Street below a Public Persona of Reform

In April, 2010, President Obama gave a speech in New York City to counter what he called “the furious efforts of industry lobbyists” geared to weakening or stopping the new financial regulations that Obama claimed would be needed to stave off a second Great Depression.[1]  It is telling that the banks that had contributed to the financial crisis of 2008 were trying to diminish or block any new regulation. The very legitimacy of industry calls for deregulation in the wake of a market failure caused in part by the industry flies in the face of the rationale for regulation. In short, the rationale for government regulation has to do with market failures, which includes fraud and over-zealous profit-taking at the expense of the public good. The root of the rationale is the difference between the interests of an organization and society (i.e., the public good). 

After the financial crisis of 2008, the U.S. President wanted more consumer protections, limits on the size of banks and the risks they could take, reforms on executive compensation, and greater transparency for controversial financial securities known as derivatives.  He maintained that each of these safeguards must be in any bill that he would sign. In giving the speech with some of the banking titans in the audience, the President wanted to confront the financial industry more directly through a sharp speech. After having castigated the bankers' “failure of responsibility” in recent years, he called on them to stop resisting tighter regulation through the army of lobbyists staked out then on Capitol Hill. The president’s address at Cooper Union in Lower Manhattan circled back to another speech he had given at the same location in March of 2008 warning of financial manipulation, market bubbles and the concentration of economic power.

Analysis:

At the time of his speech, the President was actually supporting the bills coming out of Congress. These bills would do nothing to forestall or minimize market bubbles and reduce the concentration of economic power.  The bills would not even limit or reduce bank size; instead, higher reserve requirements for the biggest banks was presumed a sufficient incentive for those banks to willing reduce their sizes. Although this approach, which would become law, incorporated the market mechanism (regarding financial disincentives), the assumption that empire-building Wall Street titans would reverse the "business logic" where in the opposite of growth is bankruptcy is very naive. It is remarkable that the president considered this approach as satisfying his requirement that the bill reaching his desk must include something limiting the size of financial institutions (especially when the systemic risk of one big bank failing and taking down the entire financial system had recently been lived through). Paul Volker, Chairman of the Federal Reserve under Reagan, was urging a decrease in the sizes of the five largest banks. 

I submit that Goldman Sachs' $1 million contribution to Obama's presidential campaign may have had something to do with it, as did Wall Street lobbying in Congress. On the eve of the President’s speech, Obama’s chief of staff had met behind closed doors with representatives of Wall Street firms. Fox News reported that Obama's message was the following: we’ve got to trash you in public, but know that we will take care of you in private.  While Fox News was at the time certainly no friend of the President, the account would explain why the President would eventually sign the Dodd-Frank Act of 2010, which except for staggered reserve requirements and a consumer-protection bureau is pretty kind to Wall Street.  

 

Recalling President Andrew Jackson, who successfully took on the bank of the U.S. by refusing to fund it in 1832, and Theodore Roosevelt, who supported the Sherman Anti-trust Act in 1911, we could certainly view Obama as not having been willing to take on the guys who not only had contributed to his 2008 campaign, but could be useful again in 2012 for Obama's reelection.  

1.  Peter Baker, "Obama Issues Sharp Call for Reforms on Wall Street," The New York Times, April 22, 2010.

President Obama and Goldman Sachs: A Quid Pro Quo?

Wall Street and the White House may be closer than the typical American thinks. One way this is accomplished is for a bank to contribute heavily to both presidential campaigns so as to be able to hedge political risk by getting ex-managers into strategic posts in the executive arm of the U.S. Government. This can be the case even when one of the candidates has campaigned on holding Wall Street accountable, such as after the financial crisis of 2008. There is the campaign slogan, and there is the political-economic reality underneath. 

U.S. President Obama nominated Timothy Geithner to be Secretary of the Treasury. While president of the New York Federal Reserve Bank, he had played a key role in forcing AIG to pay Goldman Sachs’ claims dollar for dollar. Geithner, as well as Henry Paulson, Goldman’s ex-CEO who was serving at the time as Secretary of the Treasury under President Bush, stopped AIG from the leverage in its bankrupt condition to pay claimants much less than full value, which would have been expected given AIG's plight. Once Geithner became Secretary of the Treasury under Obama, Geithner’s chief of staff was Mark Patterson, a former lobbyist for Goldman Sachs.

To head the Commodity Futures Trading Commission—the regulatory agency that Born had headed during the previous administration—Obama picked Gary Gensler, a former Goldman Sachs executive who had helped ban the regulation of derivatives in 1999. Born had pushed for the securities to be regulated, only to be bullied by Alan Greenspan (Chairman of the Federal Revere) and Larry Summers, whom Obama would have as his chief economic adviser. To head the SEC, Obama nominated Mary Shapiro, the former CEO of FINRA, the financial industry’s self-regulatory body.

In short, Obama stacked his financial appointees during his first term with people who had played a role in or at least benefited financially from financial bubble that came crashing down in September 2008. Put another way, Obama selected people who had taken down the barriers to spreading systemic risk to fix the problem. Why would he have done so? Could it have been part of the quid pro quo the president had agreed to when he accepted the $1 million campaign contribution from Goldman Sachs (the largest contribution to Obama in 2007)? Might Goldman’s executives have wanted to hedge their bets should the Democrat win? Unfortunately, getting Goldman alums in high positions of government would essentially make the U.S. Government a Wall Street Government—one that would be hampered in holding Wall Streeters accountable, even in terms of criminal prosecutions related to the financial crisis. It is no accident, we can conclude, that the spiraling economic inequality increased during the Democrat’s first term of office.

Source: Inside Job (2010), directed by Charles Ferguson

Big Bankers and the U.S. Government: A Coalition Circumventing Accountability on Wall Street

It is interesting that the U.S. Department of Justice did not pursue the fraudulent bankers on Wall Street not only during the Bush presidency, but also the following presidency, that of Barak Obama.  Not coincidentally, Goldman Sachs was the single biggest campaign contributor to Obama’s 2008 candidacy for president. It would seem that Wall Street had both political parties in a net by the time of the financial crisis in September, 2008. A sector of the economy being able to control both major parties is bad for not only industrial policy (i.e., favoritism), but also democracy. In short, a government should have enough strength to constrain a business sector, rather than being subject to it. The latter condition implies continued vulnerability should greed again get ahead of itself on Wall Street. By nature, greed, if allowed to go on running on its own steam, accumulates more and more momentum. 

The New York Times reported in 2011, “legal experts point to numerous questionable activities where criminal probes might have borne fruit and possibly still could. Investigators, they argue, could look more deeply at the failure of executives to fully disclose the scope of the risks on their books during the mortgage mania, or the amounts of questionable loans they bundled into securities sold to investors that soured. Prosecutors also could pursue evidence that executives knowingly awarded bonuses to themselves and colleagues based on overly optimistic valuations of mortgage assets — in effect, creating illusory profits that were wiped out by subsequent losses on the same assets. And they might also investigate whether executives cashed in shares based on inside information, or misled regulators and their own boards about looming problems. Merrill Lynch, for example, understated its risky mortgage holdings by hundreds of billions of dollars. And public comments made by Angelo R. Mozilo, the chief executive of Countrywide Financial, praising his mortgage company’s practices were at odds with derisive statements  he made privately in e-mails as he sold shares; the stock subsequently fell sharply as the company’s losses became known. Executives at Lehman Brothers assured investors in the summer of 2008 that the company’s financial position was sound, even though they appeared to have counted as assets certain holdings pledged by Lehman to other companies, according to a person briefed on that case. At Bear Sterns, the first major Wall Street player to collapse, a private litigant says evidence shows that the firm’s executives may have pocketed revenues that should have gone to investors to offset losses when complex mortgage securities soured.”[1]  David Skeel, a law instructor at the University of Pennsylvania, remarked, “It’s consistent with what many people were worried about during the crisis, that different rules would be applied to different players. It goes to the whole perception that Wall Street was taken care of, and Main Street was not.”[2]

Elliot Spitzer, the Attorney General of New York, was preparing to go after some big bankers until he stopped when a lawyer at the U.S. Department of Justice (DOJ) told him to back off because the department would be moving against the bankers. However, it did no such thing; the DOJ would not in fact "move" against the bankers. So it is suspicious; the lie may have been fabricated in Washington, D.C. to protect the bankers. If so, elected representatives including the president who had received sizable campaign contributions from the bankers themselves or their banks would be prime suspects. To suggest that an elected official would not protect a major contributor is like asking water to go up hill.  The subterfuge used by the DOJ at the time was that if the department went after the bankers, the banks themselves, which were too big to fail without taking the financial sector and even the economy with them, would become too unstable.
Incredibly, not only did the bankers not get punished; the banks got bailouts, which the bankers could use to pay themselves bonuses! This included bonuses at Goldman Sachs for selling "crap" (i.e., the subprime-mortgage-based bonds) to even good clients and of course lying about how solid the bonds actually were. 

Bank regulators, who can be "captured" by regulatees not only due to reliance on information from them, but also political pressure from the regulatees' political protectors in Congress and the White House, may have played a role too. According to The New York Times, bank regulators referred 1,837 cases to the Justice Department in 1995. In 2007-2010, an average of only 72 a year was referred for criminal prosecution.  “The Office of Thrift Supervision was in a particularly good position to help guide possible prosecutions.” From the summer of 2007 to the end of 2008, O.T.S.-overseen banks with $355 billion in assets failed. The thrift supervisor, however, did not refer a single case to the Justice Department between 2000 and 2010. The Office of the Comptroller of the Currency, a unit of the Treasury Department, referred only three in that decade.[3]

The relationship between the head of Thrift Supervision and the CEO of Countrywide is particularly revealing.  In March 2007, Countrywide was regulated exclusively by the regulatory agency. That agency was overseen at the time by John M. Reich, a former banker and Senate staff member appointed in 2005 by President George W. Bush. Reich was on all for deregulation. Robert Gnaizda, a former general counsel at the Greenlining Institute, a nonprofit consumer organization in Oakland, Calif., said he had spoken often with Reich about Countrywide’s reckless lending. Gnaizda says that when he suggested to Reich how he could build a case against Mozilo, the CEO of Countrywide, Reich “was uninterested. He told me he was a good friend of Mozilo’s.”[4] Reich subsequently refuted that the two were friends. “I met with Mr. Mozilo only a few times," Reich insisted, "always in a business environment, and any insinuation of a personal friendship is simply false.”[5] Even a few business meetings can be sufficient and the same ideology can be sufficient, however, to bend the ear of a regulator. Besides, Reich had reason after the financial crisis to deny any friendship with a man largely discredited due to the mortgage-producing antics at Countrywide. Mozilo’s flush fingers may have stretched as far as the chairman of the Financial Crisis Inquiry Commission, Phil Angelides. The New York Times reported in 2011 that he had told two deputies that Mozilo and Countrywide were off limits, though Angelides subsequently denied having made the statement. Instead, he pointed instead to the Republican opposition to hearings on Countrywide in Congress.

I suspect that whether of the deregulation crowd or Democratic, both parties, being of part and parcel of the establishment, had by the financial crisis of 2008 become too close to the vested interests on Wall Street to effectively regulate its banks and bankers, and thus to be in a position to investigate cases of regulatory failure. In other words, when the necessary relationship between financiers and regulators breaks down, accountability does as well. Without the regulators and DOJ being able to constrain excessive greed by holding the people in the financial sector accountable, continued vulnerability to the financial system collapsing as it almost did in September, 2008 can be expected even if it is ignored.  

See Essays on the Financial Crisis: Systemic Greed and Arrogant Stupidity, available at Amazon.

1. Gretchen Morgenson and Louise Story, “In Financial Crisis, No Prosecutions of Top Figures,” The New York Times, April 14, 2011.

2. Ibid.

3. Ibid.

4. Ibid.

5. Ibid.

Regulating Wall Street after a Financial Crisis

On Columbus Day 2011, The New York Times observed that the regulations known as the Volcker rule, “intended to limit trading when the bank's money is at risk, a sweet spot for banks, is seen as a centerpiece of the sprawling financial overhaul of the Dodd-Frank Act of 2010. In anticipation, the nation's biggest banks, like Goldman Sachs and Bank of America, have already shut down their stand-alone proprietary trading desks.”[1] Even so, the long and tortuous route by which any regulation is written was leaving its own mark in the sense that promising loopholes were finding their way into the rule. In other words, the regulated would have a disproportionate influence on the writing of the regulations. This conflict of interest is dangerous from the standpoint of not being vulnerable to another financial crisis in which the greed on Wall Street knows no bounds. 

Regulators were leaving room for “significant changes,” according to the Times. Wall Street was “lobbying furiously to tame the Volcker Rule, holding roughly 40 meetings with various regulators, warning that the changes will eat into profits at a difficult time for banks.” Those banks were undoubtedly threatening to charge more to their customers if the rule weren’t weakened. “In essence, the [rule] would upend the banking industry's lucrative, yet risky trading system, forcing powerhouse investment banks to resemble sleepier brokerage firms.” It is difficult to see Morgan Stanley and Goldman Sachs readily becoming mere market-makers and deposit and loan banks without a fight. To be sure, Lloyd Blankfein did insist that his bank was only a market maker when he testified before Sen. Levin’s Senate committee after the credit freeze of 2008.

At the time the Volcker Rule was being proposed, it was already apparent that there would be some wiggle-room for the banks. "Unfortunately, this initial proposal does not deliver on the promise of the Volcker Rule or the requirements of the statute," said Marcus Stanley, policy director of American for Financial Reform, an advocacy group. In the proposal, “a number of controversial exemptions emerged. While the regulation prevents big banks from placing bets on many stocks, corporate bonds and derivatives, it exempts trading in government bonds and foreign currencies. The proposal also provided a path for getting around the ban, for instance, when banks hedge against risk that comes from carrying out a customer's trade. Market-making and underwriting are excused, too, though the line is often fuzzy between these pure client activities and proprietary bets.” Lastly, the proposal would allow “banks to hedge against theoretical or ‘anticipatory’ risk, rather than just clear-and-present problems.” Armed with their lawyers and astute financial wizards, Wall Street banks could conceivably continue with business as usual.

Trading in government bonds and foreign currencies, and hedging even theoretical risk presumably with anything constitute an obstacle course that any Wall Street banker could run without breaking a sweat. With so much on the line and public scrutiny less potent at the regulatory stage, the financial-sector lobbyists could be expected to achieve just enough and then some. Once again, systemic risk would not be a factor, and history could repeat itself.

See: Skip Worden, Institutional Conflicts of Interests, available at Amazon.

1. Ben Protess, “Banking Industry Revamp Moves Step Closer to Law,” The New York Times, October 12, 2011. 

Morgan Stanley: Systemic Mistrust or Bad Financials after the Financial Crisis?

"Morgan Stanley by any measure is a safe and solid investment bank. Except for one: The amount of trust people have in the whole financial and political system. It's just about zero,” according to Jesse Eisinger of The New York Times in October 2011. Even as there is undoubtedly an element of hyperbole in his conclusion—for zero trust in the financial system and governments would occasion far greater problems than the world faced at the time of Eisinger’s report—his broader point that bankers would be held accountable one way or the other for not having learned their lesson on derivatives (and risk more generally) is valid. The subtext is that even though banks like Morgan Stanley were in actuality in solid financial shape, they deserved the negative repercussions from the systemic skepticism that the banks themselves brought about by virtually ignoring risk analysis in preference to a run of profits and (not coincidentally) bonuses.

Eisinger points out that, at least as of October 2011, Morgan Stanley “has almost $60 billion in common equity, compared with $36 billion before September 2008, and its ratios are stronger. Its trading book - which is volatile and where any bank can take sudden, large losses - is smaller than it was. Morgan Stanley has more long-term debt and higher deposits, both of which stabilize its finances. The bank has more cash available in case there's a crunch and a smaller amount of Level III assets, which don't have an independently verifiable value and so must be estimated by the bank. Hedge funds have parked a smaller amount of assets at Morgan Stanley. That's good because in the financial crisis, they pulled them from the bank.” But because all of this could be easily wiped out by a run on the bank occasioned or fueled by a wider mistrust of the financial sector, Eisinger brings up the topic of derivatives as a way of showing that the bankers did not in fact learn their lesson (i.e., all the improved stats may be for naught). Accordingly, the bankers deserved the systemic mistrust even at the expense of any effort having resulted in added financial strength.  

According to the reporter, Morgan Stanley had a face value of $56 trillion in derivatives in October 2011. He notes that JP Morgan Chase had more: a face value of $79 trillion. This is the GNP of some countries. Even though the bankers insisted at the time that they had adequately hedged their long positions, the hedges themselves could fail, especially if the derivatives are positively correlated, as in September 2008 when AIG was completely overwhelmed due to the housing-based derivatives caving in virtually all at once.

In other words, those of us capable of learning lessons know that we should not trust hedges in so far as systemic risk is concerned; the system itself can be overwhelmed by the sheer momentum of a really big wave. So we are back to the issue of trust in the entire financial system, which is and ought to be a drag on even stellar financials until the broader lesson is learned. Unfortunately, that lesson may not be in the immediate financial interest of particular banks due to externalities occasioned by moral hazard (e.g., the possibility of being rescued while another bank, such as Lehman, fails).

Even though governments can step in to protect the broader system (unless captured by the regulated), legislators and regulators cannot force bankers to learn their lesson. A mentality to safeguard even one’s own bank as a going concern cannot be imposed; it must be felt and valued from the inside. All too often, bankers are engaged in “managing” regulations as impediments to be minimized rather than stepping back to ask why the regulations exist in the first place. They might exist for the banks’ own good. If so, the banking lobby trying to water down the Volcker Rule might have been working at odds with those institutions that the lobby ostensibly represents. Be careful what you wish for, Wall Street bankers. You might just get it, especially if you have the gold and therefore can make the rules. It would be ironic if the protesters rather than yourselves had your back, even as you ridicule the masses marching below your towering be-windowed edifices of greed.

Source:

Jesse Eisinger, “Between the Lines, Wall St. Banks Face a Deficit of Trust,” The New York Times, October 12, 2011. 

Undermining the Dodd-Frank Act: An Incessant Desire for Profit

In the Dodd-Frank financial reform Act of 2010, financial firms in the U.S. are required to set aside higher reserves to cover losses on trades of securities, including those that “swap” the risk of default of a given security, such as bonds based on subprime mortgages. Almost immediately, the Wall Street bankers set about minimizing the new hindrance.  
Traders in the banks set about getting around the “margin requirements” by treating the “swaps” as futures, which do not require the higher reserves in Dodd-Frank. Whereas a futures contract for corn to sell at a certain price limits residual risk, swapping the risk of the default of an investment puts a party on the line for the entire investment. Moreover, unlike futures contracts, swaps have significant systemic risk because claims can all be made at once, overwhelming the parties assuming the liability in the swaps (e.g. AIG in September 2008). 
Managers at Wall Street firms have tended to not only minimize safeguards even though they protect the banks (from themselves), but also discount or even dismiss such high-risk, low-probability outcomes as come with risk to a bank as well as the entire financial system (i.e., systemic risk). Meanwhile, less money held in reserve means more money available to be lent or put into high-risk investments such subprime mortgages or bonds based bundles of such high-risk mortgages. 
Accordingly, the gradual trajectory already as of the beginning of 2013 was toward yet another systemic collapse of the financial system should enough housing markets take a down turn. “As the market gravitates to the cheaper platform—and it’s cheaper because it’s unsafe—that creates risk for everyone,” said James Cawley, CEO of trade execution firm Javelin Capital Markets.[1]  Put another way, market participants were operating according to the greatest profit, the greater risk notwithstanding. “In a distress scenario, you basically have what you had from AIG in 2008,” Cawley said; “Then someone has to step in, and we all know who that someone is: the U.S. taxpayer.”[2] So the question at the time was perhaps whether the SEC had the taxpayer’s back or was reflective of, or enabling a cozy revolving door between the federal government and Wall Street firms.
To be sure, the Volcker Rule, part of the Dodd-Frank Act, would, unless weakened, bar banks from short-term proprietary trading (i.e., on their own accounts, except for market-making), and from taking ownership states in private equity funds and hedge funds. U.S. Senator John Hatch speaking at Jack Lew’s confirmation hearing in early 2013 raised the question of whether Lew would act as U.S. Secretary of State to constrain banks’ risky proprietary trading, given that he had headed units at Citigroup that were involved in just such practices that would violate the Volcker Rule. 

Jack Lew at his confirmation hearing for U.S. Treasury Secretary. Lew had been the chief operating officer at units at Citibank.     NPR

Lew had been the COO of Alternative Investments at Citi. MAT and Falcon investment funds were sold as low-risk even though those funds were actually hedge funds with high risk.  As COO, Lew refused to offer the misled customers full refunds.  At least fourteen arbitration panels subsequently gave the customers the full refunds they had sought. Although he had not been involved in selling the funds, he did manage units that engaged in risky proprietary trading. The public would be justified in wondering if they too would be left on the hook as taxpayers rather than protected should Lew favor Wall Street's incessant desire for profit over the government's role to place that desire in check for the good of the system/whole.
After Lew, during President Trump's first term, the Federal Reserve Bank voted unanimously in late May, 2018 to weaken the Volcker Rule. The move was consistent with the president's desire to deregulate Wall Street. The flip side of the move that would enhance Wall Street profits was that the government would be doing less to protect the financial system as a whole even though the systemic risk of the largest five banks had increased with their growth. As Senator Dick Durbin had said after the financial crisis when people were looking to Congress to protect even the banks from themselves, “Congress is owned by the banking lobby.” So looking to the legislative branch should the executive be in sync with Wall Street's financial interests may not play well. Even after semi-stringent regulatory constraints have been passed, Wall Street can still have the edge in circumventing or mollifying the speed-bumps even though they are in the bank's own long-term interest, which can come to roust even in the short term as in 2008.

See Essays on the Financial Crisis, available at Amazon.

1. Eleazar Melendez, “Wall Street Setting Itself Up For Next Derivatives Crisis, Market Participants Warn,” The Huffington Post, February 14, 2013.
2. Ibid.