In the midst of the bankruptcy reform debate, Senator Dick Durbin flatly stated that when it comes to Capitol Hill, the banks "frankly own the place." They might as well have said the same thing about federal prosecutors and regulators with responsibility over the financial sector. Starting in 2005, The New York Times reports, the Justice Department opted for "deferred prosecution agreements" with banks and mortgage companies in lieu of actually prosecuting them.

I have been to this conference before. The critics of standard economics make a devastating critique of the unreality of the conventional economic model. It operates outside of historic time, makes absurd assumptions about self-correcting markets, ignores self-reinforcing behaviors, and excludes shocks that cannot be modeled, as well as cases of plain corruption. The case is just irrefutable, more now than ever, since the financial collapse.
 
George Soros uses the term “reflexivity” to describe tendency of actual economies to defy the premise that the ideal economy will move towards equilibrium. He made his fortune by understanding these irrationalities better than others, and investing accordingly.
 

We had high hopes indeed for the Financial Crisis Inquiry Commission -- the New Pecora Commission, if you will -- when it got underway this year. But Shahien Nasiripour reports that partisanship has riven the commission and that the panel's Republicans, who have been limiting their participation in the effort since August, will release a dissenting minority report before the FCIC's official product is due:

Last night I caught the midnight showing of Wall Street: Money Never Sleeps, which opens today nationwide.

Tim Fernholz asks whether the recession will ever be over:

The Reinharts found that economic growth lags for years after a financial crisis ends. Advanced economies in particular feel the effect on their labor markets, with each that has faced a post-World War II financial crisis seeing higher unemployment after the crisis than before. This, in turn, suggests that what the United States faces is not a "cyclical" crisis but rather a long-term shock to the economy, something different from what we've experienced since World War II in the United States.

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There's a nice economics fight going on between William Galston and Paul Krugman. Galston, essentially, adopts the posture of the debt hawk, citing concerns from Carmen Reinhardt and Kenneth Rogoff that increasing debt to more than 90 percent of GDP (the U.S. won't get there for a decade) will cramp our growth.

Tim Fernholz on how financial reform seems to be proceeding apace without undue influence from the banks.

Last year, in a landmark essay, economist Simon Johnson observed that the dynamics of the financial crisis made the United States look more like an emerging market economy, with all the rampant crony capitalism and corruption that entails, than a developed country with an efficient, modern financial market.