Wall Street Showdown

President Obama's Department of Justice announced last week that there would be no indictments in the collapse of AIG, an event which led to a worldwide economic collapse and cost the American taxpayer trillions. As someone who once worked for AIG I was shocked, but apparently that's how this mystery ends: Hundreds of millions of victims, smoking guns in every room, and not a perp to be found anywhere.

Yves Smith is disappointed that PriceWaterhouseCoopers, the auditors who signed off on AIG's financial claims despite mounds of disturbing evidence, escaped serious legal scrutiny. She observes that our "Potemkin" financial reform (her word) won't remove the barriers that prosecutors face in pursuing secondary parties like auditors (although I believe the Supreme Court ruling she cited only addressed civil suits.) Not only is the auditor protected, but that allows the fraudster himself to use the defense that he kept his auditor informed - kind of like Bush and Cheney using John Yoo's legal opinion to inoculate themselves from criminal prosecution.

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There's a lot to admire about the President's consensus-seeking style, however frustrating it can be to activists. But his press conference yesterday, and the management problems that led up to it, show the limits of that style in times of crisis. Hopefully the oil tragedy - let's not call it a "spill" when it's more like a sustained explosion - will help the Administration understand something that seems to elude them at times: You can't negotiate with disaster or compromise with danger. more »

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Astroturf is the term for manufacturing an artificial appearance of grassroots concern about an issue. more »

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One of my major frustrations with the economic crises is the unwillingness of anyone to confront the fact that these Masters of the Universe are immature and unreliable and cannot be trusted with such a huge social responsibility. Their behavior since the crisis hit has been embarrassing. And stupid.

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Ben Bernanke thinks we are idiots—or that we have the attention span of a tadpole. Or he mistakenly read a speech written in 2006 when Alan Greenspan was still the Maestro. more »

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Few realized it at the time, but Senator Chris Dodd's political career ended on June 12, 2008. more »

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Some version of Wall Street reform is going to pass the Senate this week. The question now is how strong that reform will be. There are still three crucial battles to be waged, all of which would significantly change the way Wall Street does business. We will not fix Wall Street with this round of legislation, but we can reduce taxpayer exposure to bailouts and rein in consumer banking abuses. more »

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Anyone who's ever seen a Terminator movie knows that civilization ended when a computer system called "Skynet" came alive and tried to terminate the human race by starting a nuclear apocalypse. After last week's "flash crash" on Wall Street, they might have wondered if Skynet wasn't working on a financial apocalypse instead.

We still don't know what happened more than a week later, and a new SEC study will probably raise more questions than it answers. Here's what we do know: Wall Street has become such a high-speed, high-tech gambling house that it can be plunged into chaos without anybody having a clue what's happening or the wherewithal to prevent it. "Real time" - where the effects of ultrafast computer events are perceived at human speed - is never less "real" than it is where Wall Street is concerned.

As a reggae rapper named Big Youth once said, "If you ride like lightning you'll crash like thunder." more »

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There is a surprisingly tough provision in the current financial reform bill that would force commercial banks to spin off their derivatives trading desks, but big bank lobbyists are fighting hard to make sure Congress strips the language out of the bill. more »

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Tomorrow President Obama will return to Cooper Union in New York, where he gave a speech on financial reform as a candidate two years ago. We're told that his advisors want him to "go big" in his speech, as he did when he addressed a joint session of Congress on health reform. But if he follows the same course he followed in health reform - "going big" on rhetoric and then "acting small" on policy - he's not just courting political blowback: He's running the risk of going down in history as this century's Herbert Hoover. more »

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