This article is right on!
This has been a bad stretch for advocates of financial reform – and therefore for the economy as a whole. One after the other, new financial regulations contained in the Dodd-Frank law are being gutted or delayed by regulators and Congress, while the bankers – escorted by a phalanx of paid economists, lawyers and lobbyists – are squealing “wee, wee, wee” all the way home.
Bankers and their lobbyists and economists help grease the skids not just with money – but with terms of “econ-speak” such as “cost-benefit analysis”, and most commonly, “liquidity”. Used and manipulated by the wrong hands, such boring and innocuous sounding concepts can turn dangerous, even fatal in the banker battle against safer financial regulation.
The list of delays, loopholes and obstacles is too long to fully recount, but here are a few of the most important.
And we can be certain that if the banks’ proprietary trading is not controlled by a robust Volcker Rule of some type, the next time around, these banks will again generate massive cycles by providing excessive liquidity to the system so they can speculate and trade on complex and opaque bets during the upswing. Then, when these crash the system, they will destroy the liquidity before their customers can get their hands on it by dumping securities into the market just as fast as they can. Do these economists really not understand this?
Read the whole article: Economists, Liquidity Mongers and the Banker Assault on Financial Reform
Author: Yves Smith.