Whatever President Obama says today about financial reform, Charlie Gasparino says the U.S. government is sowing the seeds of another financial crisis — and it’s nothing new.
NY Post: But the biggest villain, in my view, 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. Here’s Gasparino’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.