Financial Systemic Risk Problem Hasn't Been Fixed

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Michael Hirsh

Goldman Sachs and JPMorgan Chase have reported huge profits, the Dow has made it past 9000, and Barack Obama has moved on to health care. The horror show seems to be over. But as in one of those clichéd Hollywood endings, the monster in this story isn't really dead, even if most people think he is. Lost amid all the premature self-congratulation is the fact that the deepest underlying problem that caused the financial disaster is not being solved. 

The problem: how to control and keep tabs on the market activities of giant firms that cause such a disruption to the system they can't be allowed to fail. Put simply, six months into the Obama administration there is as yet no coherent proposal for solving this issue, and serious differences remain between Tim Geithner's Treasury and Ben Bernanke's Fed. At hearings this week, Sen. Bob Corker (R-Tenn.) told Bernanke bluntly that he didn't think anyone was up to that immense and vastly complex job. As Corker told me afterward in an interview: "Today there's a whole lot more questions about what systemic risk is and which powers a regulator should have than there are answers. And the last week has brought that to light."

Financial Systemic Risk Problem Hasn't Been Fixed | Newsweek Voices - Michael Hirsh | Newsweek.com

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