Obama is Bush part 3

How Wall Street Keeps Dooming Itself

We should really look at the foxes guarding the hen house... Over the last 40 years, Congress has been controlled (at different times) by both major political parties. Both major political parties have controlled the White House. Both major political parties have controlled both Congress *AND* the White House.

They have never once run balanced spending. Yes, I am sure someone will whine that that so-and-so cooked the books and produced balanced "budgets" -- but no one ran balanced spending.

No one produced an energy policy beyond Jimmy Carter suggesting we all wear a sweater. No one properly funded infrastructure like railways and highways. Adjusted for purchasing power parity, the US spends more per student on education than any other country on Earth -- but I would suggest our schools do not reflect that. While administrators sit in newly refurbished offices, teachers are forced to buy their own supplies.

For this "public service", government bureaucrats (both elected officials and career bureaucrats) have enjoyed pay raises that exceeded CPI. While stated salaries are generally less than the private sector, productivity is WAY WAY less than the private sector -- adjusting for lower productivity, public sector workers get paid LOTS more than the private sector.

And that is before we take into account benefits that are much better than almost all private sector workers

These underworked, overstaffed and overpaid bureaucrats are the ones who are (and were) supposed to be regulating all these banks.

What right do voters have to whine about bank bonuses (which are admittedly obscene) when we have been tolerating the "pay for lack of performance" compensation of our so-called public servants?

The Failure of John Thain

While you mentioned that MER is on the hook for any losses beyond the $1.7 billion -- you forgot to mention that MER will **NOT** get any upside on the off chance the value of these CDOs increases. Heads MER loses, tails MER loses more.

The Failure of John Thain

You forgot to mention that Thain sold MER's interest in Bloomberg LP -- and MER financed a good part of that sale also.

MER's two great assets are (were) its retail broker network (which has little if anything to do with who is CEO) and its investment in Bloomberg -- which is now gone.

Why exactly should a retail broker accept a pay cut going forward (eg lower commissions) when Thain got a windfall? Do a good job, get punished. Do a bad job, get a windfall.... The incentive structure of Merril (and many other iBanks) is very clear.

Produce and perish. Schmooze and profit.

The Credit Bubble: Deregulation Gone Wild

Deregulation is the big lie here. Government is MUCH bigger now than when Reagan took office. The Fed knew perfectly well what was happening, and on several occasions issued warnings. They had, and still have, the authority to regulate lending practices at the money center banks (and the little banks tend to follow). The other lending is done by FNMA and FHLMC, which are completely government controlled.

Before you start expanding regulatory power, you need to ask why the regulators made almost no use of their existing powers. You need to establish that existing powers are insufficient -- as opposed to just unused.

Even if you make the Fed into an absolute dictator, what good would it do if they don't use their powers (for good)?

The problem isn't deregulation (which never happened except on paper). The problem is the regulations we already have were not enforced.

The government had to choose between collecting higher taxes on bubble homes, or enforcing the existing rules. The government repeatedly chose higher taxes by turning a blind eye to a problem they knew about all to well.