More evidence that the big financial conglomerates on Wall Street are back to their old tricks: check out this article from Naked Capitalism. The money paragraphs are at the end of the post where they quote from the Lex Column:
Those clever investment bankers are at it again. It was surely only a matter of time before banks tried to apply their financial innovation skills to finding ways of profiting from the very crisis that misuse of those skills brought about...
On one level, such initiatives might be welcomed as industry practitioners try to find a market solution to their own problems, reducing the need for taxpayer-funded bail-outs. But there are dangers here. As studies of the origins of the financial crisis such as the UK's Turner Review have concluded, one of the keys to creating a sounder banking system is increasing the quantity and quality of bank capital - which also, of course, means lower returns. Since the new schemes being developed are designed to cut the capital cost of risky assets, they potentially go against the spirit of such proposals.
As I have written before, the big banks, having been resuscitated without having been restructured, are quickly going back to what caused the financial crisis in the first place. We need to fundamentally change the system: realign the incentives, regulate the hell out of trading, and break up these too-big-to-fail companies so that even if they make reckless gambles, the consequences don't come raining down on the rest of us.
Will the new regulations proposed by the Obama administration help? Yes, they add some additional protections, but they don't go nearly far enough. We need to fundamentally restructure this system.
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