The second center of unaccountable power goes by the name of Wall Street and is centered in the largest banks there.
If we trusted that market forces kept them in check and that they did not exercise inordinate influence over Congress and the executive branch, we would have no basis for concern.However, market forces can not keep them in check because market forces do not operate where there is opacity. Market forces require transparency to exert influence.
We wouldn’t worry that the Street’s financial power would be misused to fix markets, profit from insider information, or make irresponsible bets that imperiled the rest of us.Fix markets like the benchmark interest rates (Libor). Profit from insider information like structured finance products (ownership of servicers allows Wall Street to have tomorrow's news today and legally trade on it). Place bets like JP Morgan's London Whale CDS trade.
We could be confident that despite the size and scope of the giant banks, our economy and everyone who depends on it were nonetheless adequately protected.
But those banks are now so large (much larger than they were when they almost melted down five years ago), have such a monopolistic grip on our financial system, and exercise so much power over Washington, that we have cause for concern.
The fact that not a single Wall Street executive has been held legally accountable for the excesses that almost brought the economy to its knees five years ago and continues to burden millions of Americans, that even the Attorney General confesses the biggest banks are “too big to jail,” that the big banks continue to make irresponsible bets (such as those resulting in JP Morgan Chase’s $6 billion “London Whale” loss), and that the Street has effectively eviscerated much of the Dodd-Frank legislation intended to rein in its excesses and avoid another meltdown and bailout, all offer evidence that the Street is still dangerously out of control.Dodd-Frank was effectively written by and for the Too Big to Fail banks. The banks were so confident in their writing of the legislation that they even created the Office of Financial Research so that transparency would have a place to go to die.
The only elements not approved of by Wall Street were the Consumer Financial Protection Bureau and the Volcker Rule.
It is rare in these harshly partisan times for the political left and right to agree on much of anything. But the reason, I think, both are worried about the ... depredations of “too big to fail or jail” Wall Street banks on our economy, is ...: It is this toxic combination of inordinate power and lack of accountability that renders ... them dangerous, threatening our basic values and institutions.