By Yves Smith, naked capitalism
Excerpt: 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 has] become a subsidiary of the U.S. government...
The reason Volcker’s speech was greeted with overdone enthusiasm is that Americans are fed such a steady diet of propaganda by the officialdom that anything that bears some resemblance to observable reality is bracing by mere virtue of contrast. Think of Bernanke’s freakish calm (he looks medicated to me, although he apparently isn’t) and well honed ability to give testimony remarkably devoid of content, or Geithner’s bobbing and weaving when under the spotlight. But this circling of the wagons fools no one; indeed, Obama’s weak poll ratings and the success of the Tea Party show that polished story lines have not dispelled well warranted public anger against the banks and their enablers.
Note also the timing of this episode. This sort of talk, no matter how tame compared to what really ought and needs to be said, could have had a real impact while the financial regulatory reform negotiations were on. Volcker is virtually the only public figure with the stature to carry real weight in disputing the sort of palaver trotted out by the banksters in defense of their pet desires. But he was kept on a short leash by the Obama administration, apparently tasked only to defend the so-called Volcker rule, which was meant to get banks out of the proprietary trading business but was watered down to a considerable degree. But that simply confirms what we already know too well: that even Volcker’s modest reform ideas were more than what the bank-friendly Administration was prepared to support. (Read more)