Must Read from Joe Conason: Are Dems, GOP Serious on Financial Reform?

Conason's conclusion.

Not because of what he was advocating per se, but because of the basis of his justification.

Someone (I think it was Meet the Press) was asking him about a hedge fund operator that had been warning of the mortgage troubles brewing. The question was whether the guys should be consulted about how to prevent these things in the first place, instead of folks like Greenspan, who had obviously missed it.

Greenspan made the comment that he wasn't sure. He pointed out that it wasn't clear whether the guy had just guessed well, or whether the guy really understood the markets and what was going on. He's right in a sense. An old professor of mine used to joke that the definition of an expert was three right guesses in a row. But that's a larger point.

The vast majority of folks on Wall Street, or really in power in many places in the Banking industry, Greenspan included, aren't necessarily "smart" or exceptionally capable. They're just empowered. We don't really know how smart or capable they are because they are rarely "tested". They rise to power through a variety of means, much of it capricious, much of it relying upon the PERCEPTION that they are capable. Heck, look at the success Maddof was able to generate on absolute lies. It was COMPLETELY based upon perception. Once empowered, if challenged, it becomes a case of "reputation olympics". "Well, the guy is chairman of the Fed after all. What have you accomplished?".

The most fascinating thing going on with Wall Street today, is that the rating agencies, the ones that rated all of these AAA ratings for what are now considered "toxic assets" are still in business. Mind you, as Krugman has pointed out, 95% of these ratings were disastrously wrong. But these companies are still in business, and the executives are still getting their astronomical compensations. And the shareholders that "control" these businesses are still getting dividends.

If someone wants to talk about what is wrong with Wall Street, it would seem we have to start with the fact that none of these organizations are being run by anyone that really understands what they are doing.

Fix the ratings agencies. The Dodd bill does little to fix the credit ratings agencies, whose profligate stamping of AAA ratings on collapsing subprime mortgage-backed securities helped to stoke the crisis. (The companies have a conflict of interest at the core of their business, in that they are paid by the companies whose securities they rate.) The Dodd bill creates a new office at the Securities and Exchange Commission to look closely at credit ratings agencies — but does little more to further reform them. Numerous Democratic senators have cited the issue as a major weakness in the bill, and Senate staffers say it is unlikely to go unchanged. Sanders has said he will introduce new language to strengthen oversight over and regulation of the agencies.

http://washingtonindependent.com/83193/a-guide-to-the-tangled-financial-reform-bill