Professor Elam

In the movie Animal House, Dean Wormer finally tires of the antics of Delta House Fraternity, and announces he is putting them on double super secret probation using a little known codicil from the Faber University Handbook. 

Don't laugh, that is essentially what the Government did with Morgan and Goldman today,

Morgan and Goldman 'agreed' to come under the provisions of commercial banking laws.  Previously they had been 'investment banks.'  Let's draw a distinction.  A commercial bank is highly regulated as to lending practices, captial, and what it can or cannot do.  IT exists to take deposits and then loan them to worthwhile borrowers. An investment bank is supposed to invest money for clients and raise money for worthwhile companies or governments.  Needless to say the latter started, drinking their own whiskey putting 100% of assets into risky sub prime mortgages on the ideas that they were government guaranteed. Goldman exited that market, and Morgan pretty well had. But no doubt to escape further possible retribution as the last two big guys standing, they agreed to more oversight.

I suspect this is THE END of Wall Street as we knew it with multi million dollar bonuses. And it will be the end of comercial banks like CITI acting like investment banks. As Burns noted in his article I referenced a couple of posts back, it will probably also be the end of the two party system as we know it.  It is clear neither is doing you and I any good, only themselves

Change in fact comes not gradually but cataclysmically. The Kobe earthquake preceeded ten years of marekt collapse and stagnation in Japan. I once heard John Templeton say he did not think Amercans would stand for a protracted period of depression like the 1930s. We now know the time limit was more like a few months. America was born of a revolution in 1976.  Texas came the same way in 1836.  The first Republican was elected on the occasion of the Civil War. In each case the disagreement had festered for decades or in the case of America, over one hundred years. But a change happened in a short period of time.

Both cnadidates are trying to 'change' a broker system. Washington is too expensive too self sindulgent, and too filled with regulations that matter littel to the rule breakers. There is no accountability from the bureaucrats, not for 9/11 happening, no one was fired, not for FNM or FRE, not for the dot.com meltdown, not for anything,

Most real change comes from individuals.  The steam engine, the automobile, the airplane, the telephone, all individual inventions that did not come from big companies.  The Apple II was invented in a garage. I expect it will either take decades to change America. But maybe not, if these measures fail in a few years, highly possible given the money we are printing, we could see a massive collapse that would bring some dramatic changes,like Congress actually being voted completely out of office.

Had the markets melted down to say DOW 7,000 this week, that is the sort of catalyst I am suggesting would bring about real change.  7,000 was the post 9/11 low, but wihtout another attack, I doubt the US would have stood for the mere finger pointing we are getting even now. 

By the way, how long before we cast aside all pretense, and admit the public accountants are or will shortly become public employees?  IF Goldman and Morgan are regulated banks today, I suspect the PCAOB will morph into a much more intrusive force on accountants.