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.”
“All of which is to say that these banks repaid cash owed to a program run by the Treasury Department by…borrowing from another program run by the Treasury Department.”
It’s almost like a Ponzi scheme of TARP loans. http://pogo.ly/ebKYO4