Feeling uneasy about the banksters...

My populist sensitivities have been in over-drive lately as I watch the stock market climb while unemployment also continues it's unabated ascent. The "two America's" theory staring us right in the face, day after day.

I actually do try to make an effort to be thoughtful about issues and not merely fall into the populism trap. (I'm far from perfect but I think an awareness of one's biases is at least a step in the right direction.) I may not have liked TARP but I could understand why saving the financial sector from total collapse was actually a pretty good idea relative to the alternative. The stories emerging recently about Goldman Sachs, about the Banking industry, about Wall Street have all been concerning to me. Profits are up but are we veering back into the same traps as before? Are the fundamentals of our economy actual improving or are banksters simply getting wealthier?

Then I see Kevin Drum writing about the NY Times article on the Wall Street "surge" that has been making the rounds today and Kevin's response is thus,

As the piece points out, banks aren't using all this cheap money to increase lending. They're using it to fund bigger and bigger bets in the fixed-income sector — the same sector that brought us junk bonds, credit default swaps, subprime loan securitization, interest rate carries, collateralized debt obligations, and all the rest of Warren Buffett's "financial weapons of mass destruction." Fixed income was a sleepy backwater until about 30 years ago, and if we had any brains we'd apply a massive dose of regulatory narcotics to make it that way again. Instead, we're actually egging it on. It's like giving Nero a new barbecue lighter for Christmas because his last one got burned up in that big fire.

Anyway, in the absence of any will to seriously regulate these guys, at the very least we should demand that they get themselves off the federal teat immediately. They're all fond of the fiction that they're rugged individualists now that they've paid back their TARP money, but it ain't so. Taxpayers saved them last year, and taxpayers are underwriting their profits this year. I can think of better things for taxpayers to be doing.

Kevin Drum isn't exactly an avowed leftist. He's cool and rational as an analyst with policy tendencies that are just left of moderate. When he speaks out like this I paradoxically feel better about my own analysis and all the more worried about our economy.

Some topical postings from Yves Smith at nakedcapitalism and Glenn Greenwald.