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James Galbraith on the criminal takeover of financial services

July 13, 2010 Leave a comment Go to comments

  

In the new issue of The New Republic, James Galbraith has an article arguing that the rule of law must be restored to the financial services industries and lamenting Obama’s failure to do so.  It begins:

The financial crisis in America isn’t over. It’s ongoing, it remains unresolved, and it stands in the way of full economic recovery. The cause, at the deepest level, was a breakdown in the rule of law. And it follows that the first step toward prosperity is to restore the rule of law in the financial sector.

First, there was a stand-down of the financial police. The legal framework for this was laid with the repeal of Glass-Steagall in 1999 and the Commodities Futures Modernization Act of 2000. Meanwhile the Basel II process relaxed international bank supervision, especially permitting the use of proprietary models to value complex assets—an open invitation to biased valuations and accounting frauds.

The full article may be read here http://www.tnr.com/print/article/economy/76146/tremble-banks-tremble

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Categories: financial crisis
  1. Ray Turner
    July 13, 2010 at 6:51 pm | #1
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    Yes, James. Many of us agree with your assessment and applaud your proposed fixes, but, like most intelligent, progressive economists, you don’t suggest what CAN be done. The Obama administration, with advice from Summers and Geithner, is unlikely to betray its Wall Street friends. (There IS a reason that you, Krugman, Baker, and Stiglitz are not on the President’s Council of Economic Advisors, you know.) And the Congress…well…the less said about this inert body, the better. So…what CAN be done? By whom?

    • Robert Searle
      July 14, 2010 at 11:50 am | #2
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      You have hit the nail on the head! And even if progressive economists come up with something “radical” it is always something that has been regurgitated ad nauseaum from so-called “respected sources.” This is the key reason why I do not have much respect for many economists irrespective of whether they are progressive, or not…at least, my own project on Transfinancial Economics is something DIFFERENT from the norm, and INFACT truly IMPORTANT …..but are more progressive economists BRIGHT enough to understand why? This is multi-billion dollar question…I repeat..

      Are progressive economists BRIGHT ENOUGH TO UNDERSTAND WHY TFE IS OF THE HIGHEST IMPORTANCE?

      .

  2. Merijn Knibbe
    July 14, 2010 at 10:07 am | #3
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    Friends in high places:

    Two Dutch economists, Laurence van Lent and Ahmed Tahoun, calculated the next statistic regarding to the Troubled Asset Relief Program and the value of shares of saved and non saved banks owned by the senate and congress commitee members which decided on saving banks (2007):

    Value of shares of saved banks owned by committee members: 240.000,–
    Value of shares of non-saved banks owned by committee members: 40.000,–

    http://www.mejudice.nl/artikel/449/staat-trapt-in-eigen-valkuil-met-redden-van-banken

    Merijn Knibbe

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