Washington let Wall Street continue to call the shots and decided what is best for the US so there's little reason to be surprised. Too many people forget that modern bankers make their bloated bonuses by rolling the dice. The days of conservative bankers is long gone so the sooner Washington accepts the reality of high risk, high bonus as a central part of the problem the sooner this problem will go away.
The new spin by the banking industry is that no, they won't use their own money for gambling but only the money of those gosh darned clients who are begging for high risk and who want to use their own cash. Uh huh. How could there possibly be a problem there? After all, Wall Street has never been known to find a small gap in the law and then open it up a mile wide and drive trucks through it until their business revolves around that previously little opening.
To think that the Obama economic team or Congress - either party - did not see this as a possibility is hard to believe. The Obama economic team is flooded with Wall Street leftovers who were looking for work after Citi imploded so it's hard to believe that these former Wall Street insiders missed this.
When Congress passed a new financial regulation bill last month, it sought to prevent federally insured banks from making speculative bets using their own money. But that will not stop banks from making bets that some critics deem risky, even as the rules go into effect over the next few years.
That is because many such bets — on the direction of the stock market or the price of coal, for example — are done on behalf of clients. So, the banks say, they will continue to be allowable despite the new restrictions.
Indeed, several trades that were made on behalf of clients went bad for the banks even as the new rules were being debated in Washington this year. JPMorgan Chase and Goldman Sachs, for example, each lost more than $100 million on transactions handled for customers in the period from April to July.
