Fundamentally we have, on the one hand, the corrupting influence of the megabanks, which have to be broken up. They have such a corrupting influence because of the power, their size, their economic might and also because of the corruption of ideology because of the revolving door. So many of the Treasury officials come from the Wall Street banks they’re supposedly regulating. So that’s part of the fundamental problem.

On the Washington side, in addition to that, you have the problems of regulators who often have incentives not to be really good regulators. The curse there again is partly the revolving door. I was told point blank in 2010 that if I didn’t change the harshness of my tone on Wall Street, as well as on the administration, that I was going to be doing me and my family real harm because I wasn’t going to have this job forever. If I wanted to get a job on Wall Street or advance within the administration, I needed to soften my tone. I was told that if I did soften my tone, very good things could potentially [follow].

I obviously didn’t take that advice, as this book clearly demonstrates, but that’s the decision that’s facing a lot of our regulators. You either have people who made their millions on Wall Street and come into government … or you have folks who look at their bosses who made that money and want to be them. And the path to being like that is rarely by being a tough, effective regulator. It’s by rolling with the punches — rolling over, really, and pulling your punches and trying to get that big job. That’s not to say that all regulators do that but that’s our incentives and we need to change the incentive structure for regulators.

Neil Barofksy, former Special Inspector General for the Troubled Asset Relief Program (SIGTARP). Read more here.

“Many of the costs and benefits of financial regulation simply cannot be quantified. How do you quantify the human costs that all the economic wreckage has inflicted? Searching and not being able to find work for years…lost retirements, educations and dreams. How do you quantify that? You don’t.”

Dennis Kelleher, head of advocacy group Better Markets, in a speech on Monday at the Peterson Institute for International Economics. Wall Street is demanding precise cost benefit analyses for rules in the Dodd-Frank financial reform act, but many of the benefits to preventing another financial meltdown are difficult to quantify. Read more at The Washington Post.

SIGTARP Explains How to Rip Off the Taxpayer, an infographic from The Washington Examiner

The Dodd-Frank reforms turned 2 this week. Check out what they have been up to.

“Everyone in the industry claimed this couldn’t happen again, but if the money really is missing, then it’s like a repeat of MF Global. Anyone who thought things don’t need to change, well, have to reappraise their position,”

John Roe, co-founder of the Commodity Customer Coalition, on the news that only 9 months after the collapse of MF Global, another broker is missing $220 million in customer money. 

(Source: reuters.com)

JPMorgan Trading Loss May Reach $9 Billion →

First it was $2 billion. Then it was $5 billion.

Do you think a part of Wall Street should be able to regulate itself? In case you have any doubts about how bad of an idea this is, POGO’s Michael Smallberg will explain what is wrong with self regulatory organizations.

Get involved and tell Congress not to let Wall Street police itself.

“It can be tempting to tangle with prominent institutions. But chasing headlines and solving problems are two different things.”

SEC Commissioner Daniel Gallagher. Rolling Stone’s Matt Taibbi described this quote as “a perfect example of how completely broken our regulatory system [is].” Read more at Rolling Stone.

Here's an Idea: Make Wall Street Execs Pay SEC Fines Instead of Shareholders →

Maybe if the money is coming out of executives pockets there will be more incentive to actually change how major financial institutions operate.