{"id":47984,"date":"2018-09-27T08:00:00","date_gmt":"2018-09-27T12:00:00","guid":{"rendered":"https:\/\/www.ino.com\/blog\/?p=47984"},"modified":"2018-09-24T20:54:22","modified_gmt":"2018-09-25T00:54:22","slug":"can-it-happen-again-emphatically-yes","status":"publish","type":"post","link":"https:\/\/wwwtest.ino.com\/blog\/2018\/09\/can-it-happen-again-emphatically-yes\/","title":{"rendered":"Can It Happen Again? Emphatically, Yes"},"content":{"rendered":"

The last few weeks the financial press has been filled with articles noting the passing of the 10th anniversary of the Lehman Brothers bankruptcy. A few of the articles have been hand-wringing of the sort that if Lehman had only been rescued \u2013 like AIG \u2013 or merged with a strong commercial bank \u2013 like Merrill Lynch \u2013 the crisis would have never happened, or at least it wouldn\u2019t have been so severe.<\/p>\n

That\u2019s wishful thinking. There was plenty of reckless and irresponsible behavior taking place on Wall Street to create the crisis that did develop, whether Lehman was saved or not. Like giving home mortgages to anyone who asked while creating securities backed by these often worthless loans, which only magnified the risk by a huge factor, then slapping a triple-A credit rating on them, so everyone was assured that everything was fine. <\/p>\n

But most of the recent articles have been about whether such a crisis can happen again. And the answer is, unfortunately, absolutely. We may already be seeing the seeds being planted right before our very eyes, although I\u2019m not sure how close we are to the next crisis. It certainly bears careful watching. <\/p>\n

Boom-and-bust cycles are endemic to any free-market capitalist system anywhere, unfortunately, since they\u2019re largely based on self-interest and, too often, greed. The only system where that is not the case is a planned or Communist one, where the economy is perpetually in bust mode. When the next bust will hit is anyone\u2019s guess, but it seems with each passing day that we keep moving closer and closer to it, and not a whole lot is being done about it.<\/p>\n

What\u2019s worrisome is that bad behavior by people in the banking industry and Wall Street has gone on unabated since the crisis and now seems to be getting even worse, if the daily financial headlines are any indication. <\/p>\n

Case in point: the money-laundering scandal unfolding at Danske Bank, Denmark\u2019s largest bank. The bank itself now admits that more than $230 billion \u2013 that\u2019s billion with a B \u2013 of mostly Russian money was laundered through its tiny Estonian branch, possibly dating back as long as five years or more, and nobody there bothered to look. This during a time when bank regulation and oversight has supposedly never been more intense and more strict as a result of the financial crisis.<\/p>\n

But it\u2019s hardly the only one, although it may be the biggest (let\u2019s hope).<\/p>\n

Last week the Commodity Futures Trading Commission (CFTC) hit Bank of America with a $30 million fine for trying to manipulate the ISDAfix, which is used to settle options on hedging and interest-rate swaps. That was the agency\u2019s ninth enforcement action \u2013 and second in just two days \u2013 against firms trying to manipulate that same obscure benchmark.<\/p>\n

And before that, we had a much bigger scandal over firms trying to manipulate a much more well-known benchmark \u2013 the London interbank offered rate \u2013 which is now in such ill repute that international authorities such as the Federal Reserve are trying to come up with a new standard to replace it.<\/p>\n

Right here at home, we\u2019ve had the various scandals at Wells Fargo, with a new one seeming to crop every few weeks. Plus dozens of others, major and minor, at other institutions. There\u2019s a constant flow of them. <\/p>\n

Prospects for the future don\u2019t hold out hope for positive change. The Washington Post reported recently<\/a><\/strong> that \u201cabout 30% of the lawmakers and 40% of the senior staff who crafted Congress\u2019 response [to the financial crisis] have gone to work for or on behalf of the financial industry. The pattern, which applies about equally to both parties, is a stark illustration of how policymakers sought to profit from the financial sector after dealing with one of the worst financial episodes in U.S. history. Critics of the revolving door say it helps explain why Congress \u2014 even as it deployed hundreds of billions of dollars to bail out Wall Street \u2014 didn\u2019t take tougher steps to rein it in.\u201d<\/em><\/p>\n

What exactly will ignite the next crisis is anyone\u2019s guess. But what\u2019s clear is that the motivations that caused the last one haven\u2019t changed at all \u2013 and probably never will.<\/p>\n

Visit back to read my next article! <\/p>\n

George Yacik<\/a>
\nINO.com Contributor - Fed & Interest Rates<\/p>\n","protected":false},"excerpt":{"rendered":"

The last few weeks the financial press has been filled with articles noting the passing of the 10th anniversary of the Lehman Brothers bankruptcy. A few of the articles have been hand-wringing of the sort that if Lehman had only been rescued \u2013 like AIG \u2013 or merged with a strong commercial bank \u2013 like […]<\/p>\n","protected":false},"author":16,"featured_media":47985,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6920],"tags":[9525,4539,4607,2672,6938,9523,9524],"class_list":["post-47984","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-ino-com-contributors","tag-banking-industry","tag-big-banks","tag-commodity-futures-trading-commission-cftc","tag-financial-crisis","tag-george-yacik","tag-lehman-brothers-bankruptcy","tag-wall-street-crisis"],"yoast_head":"\nCan It Happen Again? 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