We're in for some trouble down the road. Why? Because the government people primarily responsible for the market's collapse in the immediate term - Alan Greenspan, Larry Summers, and Bob Rubin - are unrepentant and disconnected from reality. Making matters worse, according to Reich, is that the legislation being consdered in both chambers of Congress will NOT:
1. Force banks into insolvency because of reckless trades.
2. Limit the size of banks or bust up the big ones.
3. Resurrect the Glass-Steagall Act.
4. Adequately regulate hedge funds.
5. Rectify the basic distortion in the national economy, whose rewards and incentives are grotesquely tipped toward Wall Street and financial entrepreneurialism, and away from Main Street and real entrepreneurialism.
In a few words, as I've pointed out here many times here, the proposed legislation lacks teeth and contains few provisions that acknowledge what led up to the market collapse of 2008. Throwing trillions of dollars at those who induced the financial collapse may have had a stabilizing impact in the short term. However, we're only papering over the cracks. The structural problems in the economy still exist.
Look for more problems down the road if we continue to ignore, and paper over, the problems that got us into the mess of 2008.
- Mark
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