DJ and the Bear has quickly turned into one of my favorite blogs. As Mark McSpadden would say, it’s a five on the nerd scale (if you remember that, you’ve been around CU blogs for a while).
From a great post today called “The Orphan Decade” where DJ discusses lessons that should’ve been learned:
Perhaps the one area in which more lessons were there to be learned was in financial institution arena. Since money makes the world go around, it’s vital to keep that money flowing. Yet, we came within a hair of witnessing the upending of the entire financial structure.
So, we should have made progress on getting away from the “too big to fail” mentality which almost destroyed the system. We should have made progress on derivative market reform, especially regarding credit default swaps. We should have made progress on reforms in accounting and loss recognition on bank balance sheets. We should have started to deal with long-term solutions for Fannie and Freddie other than throwing in the towel and just having the Treasury and taxpayers take on the burden of the mortgage business. We certainly should have learned that bankers will always shoot-for-the-moon when given access to virtually free money for funding.
Yet, nothing has changed.
The lessons were there for the learning, but we (collectively speaking with the government) seemed be paralyzed by the initial shocks and then were inept at developing and implementing any future vision. With global investment bankers now emboldened by the “miraculous” recovery and the lack of governmental demand for changes and protection, the opportunity for reform is slipping away. This means the opportunity for the next meltdown is around some corner ahead.