There’s a reason the government seems to have no control—darn the luck—over the banks it’s poured billions into: It’s trying to save face, writes Eliot Spitzer for Slate. Washington has struck a tacit bargain with Wall Street, the ex-governor says: Taxpayers bail out the financial institutions, changing nothing about them, and in return banks “perpetuate the myth that regulators didn’t have enough power to prevent the meltdown.”
The truth is, regulators had all the power they needed. The ratings agencies, commercial banks, and investment banks that really wrecked the system are “squarely in Washington’s regulatory sweet spot.” But, seduced by the bubble economy, regulators did nothing. Now they’re asking for more power over hedge funds, as though that was the problem all along. It wasn’t. Then, as now, regulators simply refused to act.