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Bill Moyers talks with Gretchen Morgenson about the financial crisis and its likely return

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In the synopsis of this PBS interview that follows, Morgenson, who first began writing about Wall Street's excessive risk taking well before the last crisis, doesn't believe the major bills currently before Congress do enough to regulate Wall Street. As she tells Bill Moyers, "I think that the bills that we have seen thus far are half-baked and really don't address some of the crucial elements of reform that are needed if we want to prevent this kind of crisis from happening again."

One of the main issues for her is allowing banks to grow "too big to fail" -- a size so big that they present a risk to the entire economy. To reduce the size of banks, Morgenson says, "You have to increase capital requirements. You have to increase the cost of doing business for these entities if they grow too big. Then put the money they pay into an FDIC-type insurance fund."

However, getting meaningful reform is often easier said than done in Washington, where lobbyists far outnumber legislators, and many legislators rely on wealthy industries, especially the financial industry, to fund their campaigns.

Last November, the Center for Responsive Politics (CRP) published a seven-part series on the power of the financial services lobby, "Crossing Wall Street." Since 1989, they report, the finance, insurance and real estate sector has been the largest single contributing sector to Congressional campaigns -- contributing $2.3 billion in that period. As the report notes, "Despite a moribund economy, the financial industries that have enjoyed relatively little regulation over the years continue pouring big money into making sure the government's control over them remains limited." Since the beginning of 2009, the finance, insurance and real estate sector has spent more than $500 million on lobbying and campaign contributions.

Two years ago this month the financial giant Bear Sterns collapsed and Wall Street began to unravel, wiping out millions of jobs, driving millions of people from their homes, and plundering once healthy pension plans. And all this time later there is still no reform from Congress, to prevent the reoccurrence of such a tragedy. A crippled little bill seems to be hobbling out of the wreckage but still faces an array of well-armed forces gunning for it.

And that's no surprise. In the two recent election cycles, members of the Senate Banking Committee received more than $39 million from Wall Street and the banks, while members of the House Financial Services Committee raked in more than $21 million. So just how serious do you think these members of Congress are going to be about true reform?

The companies that come to have so much control over our financial system are so politically powerful that they cannot be allowed to fail. This we saw in the crisis with Citigroup, and with American International Group, the big insurer, as well as with Bear Stearns which was merged into JP Morgan to avoid complete failure.

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We saw these companies that had been allowed to grow into monsters take enormous risks all the while, which then the taxpayer had to cover, had to "backstop,' when their risky deals went bad. Problem is, we are now nowhere closer than before to any kind of technique or strategy that could prevent such a reckless and largely unregulated behemoth from rising up again.

What's the explanation for the delay? Why has it taken so long?

The answer is that there are enormous amounts of money being poured into lobbying in Washington on behalf of the financial services companies. $150 million in 2009 went into lobbying from the commercial banks and the investment banks. And that doesn't include money from the real estate industry or from big insurance companies or mutual funds. That's just commercial banks and investment banks. Bottom line: Washington is crawling with lobbyists who are operating on behalf of these companies to make sure that reform does not threaten their profitability -- no matter what the risk to the country as a whole.

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The lobbyists are the "mules' in our addicted political culture. They bring the drugs to the users. The users are members of Congress. In the same way that you can't have an illegal drug sale unless there's a user willing to buy, you can't have a bribe unless there's some politician willing to be bribed.

And isn't it amazing that the bankers who buy off our members of Congress have the temerity to come out of their holes right after driving the nation into the brink? It's stunning to watch the brazenness with which they swagger about town, throwing some of our bailout tax dollars at legislators to make sure the legislators won't put up a formidable regulatory framework.

How do they get away with it?

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Several years after receiving my M.A. in social science (interdisciplinary studies) I was an instructor at S.F. State University for a year, but then went back to designing automated machinery, and then tech writing, in Silicon Valley. I've (more...)

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