A Year Later, a Fiscal Recipe for Disaster

Advocates Say Enough Hasn't Been Done Following Fall of Lehman Brothers to Prevent More Banking Failures

(CBS)  One year ago Lehman Brothers filed for the biggest bankruptcy in U.S. corporate history, setting off one of the most volatile and unpredictable years since the Great Depression.

The day the 158-year-old firm went bankrupt, the financial landscape changed forever.

"I think the government rues the day it let Lehman fail, because that was ground zero of the economic crisis," Business Week's Roben Farzad told CBS' "The Early Show."

A year later the crisis is still unfolding. The Dow is down more than a thousand points, unemployment is close to 10 percent, and the government has pumped trillions of dollars into the economy.

Banking industry insiders tell CBS News they warned the government about a potential collapse.

"We warned about downsizing the largest mega-institutions," said Paul Merski, senior vice president of the Independent Community Bankers of America. "We have a situation where only 4 megabanks are controlling nearly half of all the financial assets in the county.

"That is a recipe for a disaster," Merski told CBS News correspondent Anthony Mason.

Treasury Secretary Timothy Geithner said the banks are more stable.

"Actually the banks as a whole are in a much stronger position today than they were nine months ago," he said.

But 92 banks have failed so far this year, compared to 2007 when there were a mere 3 failures.

Merski, and others we spoke to, said more banks could fail if Congress doesn't act.

"If you're 'too big to fail,' you're too big to exist," Merski told CBS.

Another area where little has changed: lavish bonuses.

"The problem with bonuses is not just the amount but, from the public standpoint, [giving] people incentive to gamble with somebody else's money and not paying a penalty," said Rep. Barney Frank, D-Mass., Chairman of the House Financial Services Committee.

While the president is optimistic, Americans aren't. According to a new poll, 7 out of 10 say the government hasn't taken enough safeguards to prevent another meltdown.

Have we made progress, and what more needs to be done to prevent another financial meltdown?

Professor Elizabeth Warren, Chair of the Congressional Oversight Panel on TARP funds, was asked on CBS's "Early Show" if changes are in place to make sure that could never happen again.

"The problem we have is that all the same rules that got us into this crisis to begin with are basically the same rules that are in place," Warren said. "We haven't yet made the structural changes we need to make, to make sure we don't head that [way] again."

A recent report by the TARP oversight panel stated, "Changing accounting standards helped the banks temporarily by allowing them greater leeway in describing their assets, but it did not change the underlying problem. In order to advance a full recovery in the economy, there must be greater transparency, accountability, and clarity, from both the government and banks, about the scope of the troubled asset problem. Treasury and relevant government agencies should work together to move financial institutions toward sufficient disclosure of the terms and volume of troubled assets on institutions' books so that markets can function more effectively."

What Warren said is needed is "big change."

"This isn't about saying this one thing and we'll make them stop doing the other thing. It's really about structure, and the way the plan works is that it starts at the consumer end. We have to remember this crisis started one household as a time with lousy mortgages and too much credit card debt. And it says we're going to change some of those basic rules so that consumers have better tools so that nobody gets fooled - so you can tell what kind of costs you're taking up front.

"And then there are structural changes on up the line, all the way up to what's called systemic risk regulation, where all of these products have been aggregated and are producing so much risk on Wall Street and for the rest of the economy."

[John_272]

Why is the government so intentionally inept? Sources: www.not-hud-compliant.spaces.live.com; www.hudincomeexclusions.wordpress.com.

[woeisme1]

New regulation and accountability practices should have gone hand in hand with the bailouts!

This I am very displeased with the Obama Administration over. The banks got hugh amounts of money to filter to the market and what did they do? They paid hugh bonus, went on taxpayer funded exotic vacations and conventions, bought up the little failing banks and just got bigger and bigger which is just the opposit of what we need.

America needs to demand that regulation happen very soon. America needs to demand that we rid ourselves of this notion of "too big to fail"!!

[pubsrtoast]

Many of us were on these boards long before any hint of an economic collapse warning that the $7/hour McJobs that the Bush administration was creating couldn't support 15% annual price increases and five hundred thousand dollar homes. If we knew it the MBA geniuses should have known it too. My guess is they did and went about getting as much cash for themselves as they possibly could before the bottom fell out.

[doc_holliday76]

by rightstateofmind:
"His economic policies have been devastating to..."
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Just love how the UNHINGED RIGHTWADS try to press their idiotic case against President Obama by using such moronic "user names" trying to indicate they 'know' more than anyone else. It's not working, and clearly shows exactly how far from reality they tend to exist.
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Professor Elizabeth Warren, Chair of the Congressional Oversight Panel on TARP funds, says:

"The problem we have is that all the same rules that got us into this crisis to begin with are basically the same rules that are in place," Warren said. "We haven't yet made the structural changes we need to make, to make sure we don't head that [way] again."
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According to a much more intelligent and non-partisan voice, Professor Elizabeth Warren states that exactly the same policies REGULATING (if at all) the financial sector haven't been changed from the previous mis-administration, and "structural changes" must be made to prevent any more of the same problems from happening again.

Personally, I think it's just the monopolies formed by mega-corporations in sectors like in BIG FINANCIAL and BIG OIL that create these "to BIG to fail" corporations by gobbling-up all the smaller and safer companies that have always given us more competition by numbers -- not size.

We need NEW REGULATION and ACCOUNTABILITY for the financial sector!

[pigsinlipstick]

WE SHOULD ALL PRAY TO OUR VARIOUS GODS THAT OBAMA CAN

BEAT THE REPUBLI'CON' GREED MACHINE AND MAKE LIFE BETTER

FOR MILLIONS OD AMERICANS,

WHY IS IT THAT THE PEOPLE OF THE SOUTH CONTINUE TO

VOTE AGAINST THEIR OWN SELF INTEREST?


TIME TO BE RID OF THE REPUBLI'CON' DISEASE THAT INFESTS AMERICA

[pop95]

This is why we will fail. The American people don't get it. Both parties are on the take and have sold us down the river. Just try using a little common sense and you might be able to see the obvious!

The root of the Angry White Man stems from the typical middle class 'Lemming' who got very lazy and lapsed into hypocrisy thus voting in the liars election after election until the government realized they had a large group of middle class suckers that would believe anything if dressed in appealing false promises! The best of the greed mongers have risen to the elitist ranks who run the huge lobby groups that pay the politicians to favor the multinational corporations which harm the voters in so many ways. (Does ********** come to mind?)

They have deleted the checks and balances and allowed the multinationals corporations to morph into large monopolies thus trampling our Democratic competition and giving the people less choice and service. They have unfairly placed Supreme Court judges to favor the elitists and protect them from Class A lawsuits representing millions of Americans such as those that became sick from factory farming.

We are becoming the very thing our forefathers tried to protect us from when they wrote the Constitution and Bill of Rights. Not one politician except Ron Paul realizes we need to get our Constitutional rights back to stay on course. It is what made us great and the lack thereof will continue to tear us down!

[heresmy2cent]

We haven't seen any meaningful changes to the banking system from the federal government thus far and we won't see any.

The economy will have to completely collapse and maybe(and that's big maybe) some real regulations might be put in place.

Wall Street (Goldman Sachs, BOA, etc.) has the Feds in their pocket. Our government is so corrupt and indifferent to the wishes of the people that it is pathetic. These bankers realize the sweet position that they are in. They will continue to hand out undeserving bonuses and do whatever they like because they know "they are too big to fail."

Nothing is going to change.