Wall Street exists, on a theoretical level at least, because we have decided that limited liability companies provide a public benefit. When they don't, perhaps we should revisit this contract. Pulling the charter of a serial fraud factory like JPMC would have a salutory effect of reminding companies of their duties to society as a whole.

@ghost re: specific deregulation. Reagan's deregulation of mortgage industry. 1999, clinton repealed Glass Steagall. 2004, the SEC relaxed the net capital rule, which allowed greater self-regulation and let the big banks lever up irresponsibly. 2000, commodity futures modernization act, which basically caused the credit default swap market to explode (and then implode). And although it isn't deregulation, regulators never fully understood or monitored the shadow banking system. So there was definitely insufficient regulation in that regard. I think you are wrong if you think that lax regulation/enforcement was not a major factor in the recession.

@everyone: this is a very good and readable summary summary of the academic and popular literature on the crisis: http://www.argentumlux.org/documents/JEL_6.pdf

So the burglar escapes blame because he was smart enough to bribe the chief of police?

There will always be a burglar, there will always be a crooked guy in finance. All you can do is have a system where the crime is harder to commit and caught earlier.

@alderian: you are referring to Clinton's repeal of Glass-Steagall.
As for mortgages, you are right but that is only half the story. The other half of the story is the misuse of securitization practices. Securitization is a process of shifting loans (and risk) off the balance sheet of banks, mortgage brokers, etc. and thus can help expand available credit. The idea is to pool together mortgages and use these pools to back securities. These securities are then dividing them into tranches with different risk profiles, which creates liquid markets for what were previously considered illiquid assets. This is a good thing but for a variety of reasons (poor underwriting standards, misincentivized rating agencies, ridiculous assumptions in risk modelling) it went terribly awry in the US housing market.

Oh, I agree that the government regulators were captured en masse and actively abetted the implosion of the financial world. But I still regard the insanely greedy merchants of fraud as the primary cause. Had they been as capable of self-regulation as they claimed and continue to claim, the various governments' utter failure to do their fucking jobs would have been of little import.

@bob and invictus: The function of "Wall Street" is really to raise and allocate capital to its most efficient uses. This is very important in our capitalist system. We can't get rid of "Wall Street" (without completely reworking our economic system) but we can (and need to) reform it -- better align banker's incentives with social goals, introduce tighter capital requirements, ensure that there is no more 'revolving door' between gov't and the banks, etc.

Would you argue that it has been efficiently allocating capital, or would you say that it has been serving, over the past 30 years or so, primarily as a means of allocating capital to itself, to the detriment of society as a whole?

I don't think its an either/or situation. I think there has been criminal behaviour that has led to disastrous consequences for society, and that bonuses and compensation have been incredibly over the top and have led to skewed incentives. However, the financial system has also played a significant role in expanding access to credit, the success of silicon valley, etc.

See, and I look at the stagnation of real wages for 95% of society over the past 30-35 years and it looks to me as of Wall Street has basically been appropriating all of the benefits of growth without sharing it with society as a whole, at least in America.

I'm not sure Wall Street is the main culprit for rising income inequality. I would blame Republican economic policies (tax breaks for the risk, anti-union agitating, ;trickle down' economics, etc), globalization and a pretty broken education system. But OK.

*rich not risk.

its all part of the plan. The world economic machine has now included China and South America. In order to properly intigrate these regions, the population have to experience and learn our capitalist (democratic) way of life. One way is to give them industry(out sourcing) such as cars washing machines ect. We had these industries in the past and "grew" our nations. Now its time to spead the wealth. I could go on about how nefarious the control of our world is...

Anybody ever played the board game Monopoly. That just about explains how we end up huge imbalances in wealth and to continue the game the wealthy have to give money to the other players to carry on.
Capitalism is not sustainable without a tax system that taxes wealth and pumps the money back in at the bottom end to carry on the consumption process. Once the poor stop consuming the rich stop getting richer. The big fear for the rich is that a lot of their wealth is tied up in property values and stock prices.
To carry on the unsustainable capitalist system for a few more years the answer is simple, wealth redistribution from the rich to the poor through taxation.

sigh @nigeebaby

loowkey you only got 9 , I've got loads more than you, are you stoopid or wot?
You should take Joe Dolces advice mate....

lol just means you spend more time playing games

I'm to blame. Sorry.

For the last 20 years or so I've been involved in buying houses and renting them out. I formed a limited company to do this. It has been easy enough for me to use opm (other people's money) to buy these houses and for me to collect rents in order for me to pay the interest on that money (but not the principle). I made my
Iiving by collecting more in rent than I paid out in interest. In addition the houses rocketed in value and allowed me to borrow more money to buy more houses to collect more rent etc etc - I created a virtuous circle. Go me.

The problem is of course is that I didn't produce anything. A lot of the rent came from government benefits paid to my tenants and whilst the banks are happy their security is a risk of collapse.

Blaming the government for this is crazy, as a landlord I'm to blame. I'm not the only one of course and everyone who took 'cheap' money shares responsibility.

I'm only a small player, but I can see why people who try to make a living don't see the bigger picture, I have a duty to my family before my duty to my country.

If the market collapses more I can wind up my business and hide behind the benefits of limited liability. Are people saying I should take more responsibility and make good any debts my company makes?

In short I think that we are all to blame, no politician is going to tell you that of course in case we stop voting for them, but it's the truth.

Again sorry,I'll try to do better next time.

@Nigee

Clearly what we need are more beauty contests. I WILL win first prize one of these days.

In my mind you already have Queen Octavious

Nigee, baby, I know I'm hard to resist but if you leave your life for me you'll regret it. Maybe not today. Maybe not tomorrow, but soon and for the rest of your life.

I'm willing to take that chance.....

@Maniac
I fail to see how your argument has got anything to do with the lack of jobs in America

I think that in Europe it's worse than in America.

"The cause is capitalism itself..." this is such a bullshit, politically correct, assinine argument. It's pretty amazing that for hundreds of years in the new world, then the US, capitalism worked pretty damned well to spur growth, create wealth and industry, improve people's lives, etc. It's only in the ever increasing age of government oversight and regulation within the last century that things have gotten so fucked up.

You anti-capitalist meatheads really need to crack open a history book every now and then and get your asses out of the left-wing propaganda mill...seriously...