Charlie Gasparino has a very interesting piece published in today’s NYPost. He writes about the financial crisis, which he points out, remains still unresolved, and how the U.S. government is planting the seeds of another financial meltdown.
According to Gasparino [from the NYP], “The biggest villain….is that ultimate enabler of Wall Street’s greed and stupidity — the federal government, in the form of the Federal Reserve and Treasury Department.
Throughout the last 30 years of market ups and downs, the feds have bailed out the financial system by cutting interest rates to excessively low levels or, when Long-Term Capital was about to explode, by orchestrating a bailout of a hedge fund that had spread its virus throughout the banking system.
Each time, the financial bureaucrats told us the bailout was necessary to prevent total financial calamity — and that Wall Street had finally learned its lesson and wouldn’t engage in the risky practices again….Well, not quite. After each market implosion (in 1986-7 and 1994 and on through the 1998 LTCM crisis), Wall Street returned to risk on a larger scale — until the mother of all meltdowns swept the financial system this time last year.”
Here is Chaz’s solution.
“Goldman, Morgan and the rest of the “banks” should either become hedge funds — with no backing from the federal government and taxpayer funds when they engage in risk — or start handing out debit cards and toasters and become real commercial banks by concentrating on signing people up for checking accounts, instead of trading esoteric bonds. If we don’t impose such hard rules, expect a repeat of what happened last year. If history is any guide, that implosion will be bigger and more dangerous than ever before.”
The article’s highlights of the grave potential to repeating the massive risk and leverage blunders taken on by the major Wall Street’s financial institutions, emphasize once again how frighteningly close we came to destroying the entire financial system. Let’s hope we have learned the lesson this time (somehow I highly doubt it).