Thank you to Louise Hartmann for keeping financial service reform on the front page. The EU today (5/18) recommended signficant changes to the regulation of hedge funds. Regulations that allow the funds to exist, but places limits on naked shorts, are reasonable and worthy of a worldwide discussion. With this move, the main excuse for non-action on financial regulation in the U.S. is removed. Instead, the BBC reported that the Obama White House rejected them out of hand. At least London was a bit more diplomatic. Europe realizes that the financial sector is out-of-control. Ninety-nine percent of the U.S. population realizes that same. The White House cannot be allowed to dismiss us without offering a reasonable alternative.

There are many tangential issues, but these are critical to the world's stability.

-- America's big banks, including Goldman and Morgan, borrow taxpayer money (at almost 0 interest) to finance their hedge funds. They can bring down (short) governments and companies on the taxpayers dime! Small and medium sized banks are barred from this borrowing.

-- Even though it was the off-balance-sheet activity in mortgage backed securities that brought down the world's financial system, it is still legal for big banks to keep significant activities off-balance-sheet, so no one really knows what they are doing.

-- Goldman and Morgan were granted "bank holding company" status late once Saturday night during the crisis so that they could get Treasury and Fed (taxpayer) money. Neither bank has made effort one to serve any community, which is what bank holding companies are supposed to do.

-- As long as the commercial and investment banks are in the same organization, the taxpayer will surely be tapped to reimburse them once again for their bad trades.

-- While Ben Bernanke and Alan Greenspan testified that they did not see the crash coming, we are asked to believe that the Fed will be a "prudential regulator" that will prevent future market tumbles. If iI was a conspiritorial sort, I would believe that the mega-banks will simply be bailed out quietly, without all those pesky reporters around, asking embarrasing questions.

-- The biggest TARP recipients have done the least to assist states, cities, or people during the credit crunch.

It is truly frightening to think that the Obama administration so quickly dismissed the EU proposals. We would have expected that from John McCain, which is why he was defeated!


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