) --Wall Street has only itself to blame for the sweeping financial reform that passed the Senate last night.
The Senate bill is described as harsher than a version passed by the House of Representatives in December, with various media bandying around terms like "historic banking reform," "seismic changes" "crackdown on Wall Street."
There have been dire predictions that the legislation could
, wiping out as much as 75% of profits. Regardless whether all the hyperbole is true, Wall Street and the financial sector brought this on itself.
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Left to its own devices after the repeal of the Glass-Steagall act in 1999, the sector lost all self control. Merger mania took hold, with
and then buying
Bank of America
, just to name a few deals.
Meanwhile, the subprime mortgage industry blossomed, so-called "liar loans" came onto the scene and lending standards went out the window. This was the golden age of
, which rose to greatness in the mortgage business before collapsing into the arms of Bank of America after the bubble burst.
In those heady days -- when everyone believed that real estate values could only go up --
became household names as a succession of presidents and Congressional leaders from both parties encouraged loose lending so that every American could have a shot at the dream of home ownership (whether they could really afford it or not).
And then things really got going.
That's when big banks like
started bundling mortgages into investment packages and then got creative with "derivatives" that split the interest payments from the actual underlying assets, creating more ways to bet on the housing industry.
Then came derivatives of the derivatives, and before too long even the bankers themselves had lost track of what was what.
It was all good as long as real estate values kept going up -- but that was just a pipe dream and eventually we all woke up with a massive hangover and a fiscal crisis that caused so much strain on the global economy that we're still struggling with the aftershocks in Europe and the U.S.
Now you may be wondering why I am rehashing all this.
Well, it seems to me that Wall Street may need a reminder as the anti-reform rhetoric ramps up in an effort to dilute whatever compromise comes out of House-Senate negotiations to reconcile their different versions of financial reform.
I'm not saying the financial reform legislation doesn't have its flaws, mind you. I'm just saying that the banks brought this on themselves and there's no stopping it now.
--Written by Glenn Hall in New York.
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