On the first anniversary of the Lehman Brothers collapse, President Obama will be calling for quicker action on financial reforms. But will it have the desired effect? That's unlikely.

Wall Street has not changed at all. As Stevenson Jacobs from Associated Press reports, risk taking for the banks is back with a vengeance with Goldman Sachs, JPMorgan Chase and others - which received tens of billions of dollars in federal aid - once more betting big on bonds, commodities and exotic financial products.

Jacobs writes: "They're still packaging risky mortgages into securities and selling them to investors, who can earn higher returns by purchasing the securities tied to the riskiest mortgages. That was the practice that helped inflate the real estate bubble and eventually spread financial pain around the globe. In a way, the government has emboldened banks to keep selling risky securities: Since the crisis erupted, federal emergency programs have helped keep the banks from failing. But now, as the financial system recovers, the government plans to phase out these backstops - leaving banks more vulnerable to big bets that go bad. One investment gaining popularity is a direct descendant of the mortgage-backed securities that devastated many banks last year. To get some lesser performing assets off their books, banks are taking slices of bonds made up of high-risk mortgage securities and pooling them with slices of bonds comprised of low-risk mortgage securities. With the blessing of debt ratings agencies, banks are then selling this class of bonds as a low-risk investment. The market for these products has hit $30 billion, according to Morgan Stanley."

The problem, as Liz Moyer from Forbes correctly says, the system has become more complex and even more interconnected since the Lehman collapse. Worse still, the remaining banks have less competition with the demise of Lehman Brothers, Bear Stearns and Merrill Lynch getting swallowed up by Bank of America.

Moyer writes: "Lehman was far from the biggest Wall Street bank, in fact it was the smallest of the big four still standing after the collapse of another relatively small firm, Bear Stearns, in March. Interconnectedness was the problem. And in our increasingly sophisticated and complex global financial system, it still is. How to eliminate that risk? This may be tough to swallow, but the truth is that you can't."

The Lehman collapse highlighted the flaws in the US system. As Australian commentator Stephen Bartholomeusz says, Lehman was allowed to fail because US regulators misjudged its systemic importance and the psychological fallout from its failure. They also made the mistake of assuming that the way to avoid moral hazard and make capitalism work is to produce real and painful consequences for recklessness and misjudgments. "The first mistake came about because the regulators didn't properly appreciate the inter-connectedness of the global system,'' Bartholomeusz says. "Nor did they properly appreciate the implications of its opacity - that no-one actually knew with any certainty what the connections were. The view that allowing Lehman to collapse would be good for capitalism would have been worthy, except that trying to maintain that principle would have destroyed the global system - which is why Lehman turned out to be a very isolated case."

Of course, now the only answer is for regulators to ensure banks have adequate capital and take fewer risks. Unfortunately, that doesn't seem to be happening. The banks are back to their old tricks.

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