Stalin Aside, Graham's Wrong on Wall Street Oversight

Apparently Lindsey Graham, a Republican senator from South Carolina, didn’t read my “Five Things.” Either that or he felt comparing policy to Stalin’s wasn’t similar to comparing it to Nazi’s.

Either way, Graham’s throwing the newly formed consumer protection agency, already approved and awaiting confirmation of President Obama’s nominee to head it, into the “something out of the Stalin era” was ill-advised and, as usual in today’s small-minded political arena, off the mark.

Let’s remember if we can, that not all that long ago we suffered a deep and painful financial market collapse. Now I’m not a huge fan of regulation, but it seems rather obvious at this juncture that while there were a number of reasons for it (as it spread through Wall Street, banks and the mortgage industry, wiping out investment portfolios and huge chunks of the housing market), clearly a lack of oversight and regulation played a large roll.

Greed is perhaps a fundamental driving force on Wall Street, but greed in and of itself isn’t necessarily a bad thing if viewed within a context of profit. But greed gone bad makes for bad business because it then becomes the only driving force for a company, or, in this case, companies, creating lousy products and pawning them off on other companies as safe and secure.

Without getting into a drawn out debate about the Glass-Steagall Act (which mandated a separation between a bank’s lending and investment businesses), it’s pretty clear the current system isn’t working. One reason is that Wall Street is always trying to create new products to sell and, thus, grow profits. Now there isn’t a thing wrong with profit, but packaging a bunch of crappy high-risk mortgages made for bad investments, often to firms and investors down the sales line. The whole thing was a house of cards . . .  and it collapsed. And years later the markets are still paying the price..

The fact that these products were created, sold and then purchased shows not only a breakdown in regulatory oversight, but a lack of corporate oversight. And it cost U.S taxpayers hundreds of billions of dollars to bail out not only government-owed Freddie Mac and Fannie Mae, but a slew of banks and investment houses. Fraud abounds.

Lindsey Graham and others would have Wall Street operate without any real regulations. Did we not learn anything? He complains the new financial oversight committee would operate without congressional control. Well, since Congress doesn’t seem to control itself or do too much, this looks like just more political posturing. Reform is here, Lindsey, whether you want it or not. Regulations are not always bad, often they limit bad behavior.

That has nothing to do with Stalin. It has more to do with people’s distrust of bankers, and politicians caring for nothing about themselves and their re-election. Do we not learn anything from history? . . . Even if that history is just a few short years in our past.