As the Banksters swoop into town, the Angelides Commission has an enormous challenge ahead of it: While we know a great deal about what led to the financial crisis, we face an accountability gap wider than the Grand Canyon. The Angelides Commission must identify the specific practices that contributed to the crisis and out the perpetrators, including high-level figures on Wall Street and in government. The recently released AIG e-mails indicating that the New York Federal Reserve, then headed by current Treasury Secretary Timothy Geithner, instructed AIG not to identify its credit default swap counterparties is illustrative of the kind of granular reporting and revelations that are needed.
While the commission digs into the past, we must also recognize that we do in fact know a great deal about the causes of the financial collapse – and that Wall Street and the big banks are still engaging in the same reckless practices.
1) Financial institutions are still doling out enormous compensation in the form of salaries and bonuses that rewards risky behavior and short-term performance. Touted reforms are mostly cosmetic changes.
2) Major banks gobbled up other major financial institutions that were failing, worsening the too-big-to-fail problem.
3) Speculative betting is still rampant, with financial institutions recording profits largely due to proprietary trading.
4) Banks are still ripping off consumers on such basic things as overdraft protection and fees.
5) There has been a total failure to deal with the mortgage meltdown. Only a small fraction of mortgage loans have been modified, with only a tiny few adjustments of principal. Millions of homeowners, many of whom have lost their jobs, are still suffering under crushing payments. Millions of families are needlessly being thrown out of their homes.
6) Wall Street’s influence in Washington is as great as ever, notwithstanding that the financial sector has crashed the national and global economies.
Absent far-reaching reform efforts, there is every reason to suspect these practices will, at some point, lead to the same results.
Congress should ensure that commercial banks are not engaged in risky speculative betting; break up the too-big-to-fail banks; prohibit risky financial instruments that serve no social purpose; adopt comprehensive campaign finance reform; and ensure that international agreements do not constrain the country’s ability to regulate properly. As Wall Street prepares to roll out annual bonuses, atop the congressional reform agenda should be a crackdown on abusive compensation practices, starting with a windfall bonus tax.
Robert Weissman is president of Public Citizen.