Designing a Blueprint for Accountability

Posted: 03/27/2012 8:45 am

If you live in the Washington-Wall Street power corridor, what do you think is the essential first task to reviving the economy? Repealing some of the very few protections against fraud in the market that were put in place after the multiple crises of the past decade. Only in the Washington, D.C. echo chamber -- the same one that brought you the deregulatory spasm that led to the bubbles and inevitable crises in the first place -- could repealing these protections be seen as a step to reviving a moribund economy. Even as the Volcker Rule -- the single most important element of the minimalist reform agenda that was approved -- is being killed through death by a thousand cuts, the voices of entrenched Wall Street have succeeded in turning back the clock.

The root causes of Wall Street's violations are really quite simple to catalogue: conflicts of interest built into business models that promote violations of fiduciary obligation; easy access to "OPM" -- other people's money -- coupled with fee structures that reward selling bad products because others are left holding all the down side risk; and the certainty that institutions that are too big to fail will get bailed out when things really get tough, again insuring the socialization of risk while gains are privatized and held by the fortunate few who are properly situated to take advantage of the aforementioned conflicts and fee structures.