The Obama administration has finally decided to go after big banks. The Federal Housing Finance Agency (FHFA) has sued 17 institutions including, Goldman Sachs, JP Morgan Chase, and Bank of America for mortgage fraud. The lawsuit comes nearly on the third anniversary of the collapse of Lehman Brothers, the largest bankruptcy filing in U.S. history, when in 2008, Wall Street was on the brink of tumbling after investing in risky home loans and questionable securities. Three years later, the lawsuit reveals that Wall Street is still corrupt and a government watchdog is needed to make it more transparent. The primary reason is a kind of "Wall Street culture" which instills in the worker a rigid sense of greed and arrogance.
Karen Ho, who worked at Bankers Trust, says in her book Liquidated: An Ethnography of Wall Street, that there is “culture of smartness” that is central to understanding Wall Street’s failings. Wall Street’s financial institutions claim they have created the smartest society on the planet. Smartness is measured or exhibited by a strong readiness and risk-taking that is bolstered by image, performance, and confidence that is akin to arrogance.
For example, last week the Swiss bank UBS suffered a $2 billion loss after a rogue trader in its investment banking division gambled money away. Although the individual has been detained, his actions show that corrupted activities in the name of profit are still rampant on Wall Street.
Wall Street’s culture is difficult to change, as it is often thrust upon potential employees during rigorous recruiting efforts by top firms at top universities. First-year students are placed in financial training courses and taught the necessary skills needed to work on Wall Street. The courses, in other words, direct students towards Wall Street ideology. But, not everyone is letting Wall Street run amuck.
Elizabeth Warren, professor of law at Harvard Law School, is the architect of the Consumer Financial Protection Bureau (CFBP) which is designed to make Wall Street more transparent and eradicate chicanery that banks use to make it difficult to discern and compare the costs of mortgages and credit cards. Warren has made it her life-long mission to fight for middle-class families, as she herself lived on “the ragged edge of the middle class.”
Republicans claim that the bureau lacks accountability and gives too much power in the hands of a lone director. What Republicans fail to realize is that Wall Street hotshots also have too much power because they view themselves as pillars in global socioeconomics. As such, a watchdog is needed to render Wall Street more transparent and accountable. The actions of the UBS rogue trader, and Wall Street as a whole, warrants the establishment of an oversight agency. Letting it run wild will only create more financial difficulties in the future.
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