If there was any doubt that the US financial system is nothing more than a dysfunctional casino, look no further than Paul Volcker, the former chairman of the Federal Reserve and advisor to President Obama.
It's summed up by The Wall Street Journal and Volcker did not mince his words when he was speaking to a banking conference in Chicago. "The reason we are all here is that the financial system is broken. We can use that term in late 2008, and I think it's fair to still use the term, unfortunately. We know that parts of it are absolutely broken, like the mortgage market which only happens to be the most important part of our capital markets."
And he doesn't see any chance of a recovery. "It's been so difficult to get out of this recession because of the disequilibrium in the real economy."
He blames some of the problems on the Federal Reserve which, he says, became a little too infatuated with its own skills. And he questioned whether the "smartest people turned out by business schools" can be left unsupervised on Wall Street.
What's needed is obvious. We need to see more stringent supervision and more diligent regulation of derivatives and the shadow banking system. And until Obama shows some leadership on that, there can be no recovery.
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