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Despite all of the political rhetoric surrounding financial reform legislation, "Too Big To Fail" over leverage in the banking system, and high risk bets at proprietary Wall Street trading desks will not be resolved in the pending legislation because Washington and Wall Street have a symbiotic relationship held together by the realization on both sides that they need each other for survival.
Those reports only require a snapshot of the balance sheet on the call report date, i.e., the last business day of the quarter. So, by significantly reducing "borrowings" on the last day of the quarter, they are able to hide their true leverage and technically produce higher capital ratios for their regulatory reports.
Such leverage, of course, was and continues to be the major cause of financial instability. Leverage, along with the risks taken by the proprietary trading desks of the "Too Big To Fail" were supposed to be fixed by the financial regulation bill now in a House-Senate conference committee. But, a closer look at the pending legislation reveals that neither excessive leverage nor the risks taken on the proprietary trading desks have really been addressed.Another Journal opinion piece entitled
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