Legislation to fix America's financial markets is unlikely to save us from the next crisis.
Writing in Forbes, the former chairman of the Federal Deposit Insurance Corp William Isaac says the legislation will fail to do the job because it does not fix up the Securities and Exchange Commission, which was one of the main culprits for the financial panic in 2008 and it hands over too much power to a highly politicized US Treasury which bailed out the banks.
Writing in his blog, Bill Clinton's former secretary of Labor Robert Reich says the legislation won't help because it doesn't change the structure of Wall Street. It refuses to break up the biggest banks which already control half the US banking system's financial assets. You don't have to be a financial whiz kid to work out that if these banks got in trouble, it would shatter the financial system. Secondly, it's unlikely to stop banks engaging in high risk derivatives trading. A proposal from Senator Blanche Lincoln forcing banks to spin off their derivatives trading business is unlikely to get up.
Not surprisingly, Arianna Huffington has compared the legislation to George Bush claiming "mission accomplished." The big worry is what comes next.
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