Robert Reich explains that we already have ways to regulate Wall Street:
Former Treasury Secretary Hank Paulson admitted in his recent memoir that Lehman Brothers’ balance sheet was bogus before the bank collapsed in 2008. Nonetheless, Lehman paid out $5.2 billion in bonuses in 2006 and $5.7 billion in 2007. Lehman’s investors lost a fortune, of course. But Paulson doesn’t extend his logic to its natural conclusion. Lehman’s practices weren’t all that different from those of every other big bank on Wall Street. Lehman was just the first to go under, causing a financial run that led George W. Bush to warn “this sucker could go down” unless the federal government came up with hundreds of billions to bail out the remaining banks. It should be obvious that the bailouts concealed the other banks’ bogus balance sheets — thereby covering their assets and their asses.
We now know, for example, that Goldman Sachs along with a few other banks helped Greece hide its public debt and then placed financial bets that Greece would default, using “credit-default swaps” to avoid risking its own capital. It’s the same tactic Goldman used for (and against) American International Group (AIG): Hide the ball, and then bet against the ball and fob off the risk to investors and taxpayers — using derivatives such as credit-default swaps to make sure no evidence of the risky tactics appears on the balance sheets. Even today, no one knows the fair value of the complex derivatives underlying these and related maneuvers, which is exactly the point. One can only wonder how many other countries, and companies, may blow up in the future.