President Barack Obama came to New York yesterday to tout economic reform and observed with regard to the nation's financial crisis, that "storms of the past two years are beginning to break." But are the Wall Street megabanks whose reckless ways helped put the economy in peril again seeding the clouds?
There are signs. An Associated Press report notes that Goldman Sachs, JPMorgan, Chase and other big banks — the same ones that enjoyed a taxpayers' rescue in the form of tens of billions of dollars — can't seem to resist the siren song of taking a chance: risky bonds, packaging high-risk mortgages into securities and selling them to investors, betting big on commodities, and backing financial products that recall the good times (for some) when the high rollers ruled the street.
It was only one year ago, however, that Lehman Brothers collapsed. Absent a federal bailout of epic proportions, other big banks would have followed.
For a time, with the exception of a few tone-deaf Wall Streeters that continued to pay big bonuses, the big institutions became conservative, paying more heed to their capital-to-risk ratio, for example. But now, with a glimmer of hope in economic recovery, it appears some are breaking out the champagne glasses prematurely.
For one thing, the sturdy government regulation that Obama's administration proposed long ago has made little progress in Congress, where the big financial institutions, while publicly embracing reform, have worked through lobbyists to stall it.
Yesterday, Obama sought both to reassure Americans about the economy and to affirm his belief in regulation that would require the big banks to avoid taking risks with investments without having the capital to back them up.
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