The financial crisis of 2008 laid bare the vulnerability of the U.S. financial system on a scale not seen in generations. It exposed fragmented and antiquated regulations that allowed large parts of America’s economy to operate with little or no oversight, including some irresponsible lenders.
That assessment is from the U.S. Treasury, and taken pretty much word for word from an anniversary pamphlet it has produced, “The Financial Crisis Five Years Later: Response, Reform and Progress.” It is a short and graphical tour of the crisis and its aftermath, well worth a quick flick though. The chart, reproduced below, of the estimated losses and gains on the various Treasury and Federal Reserve crisis response programs alone deserves a perusal. Only in America could the worst financial crisis in living memory be run at such a tidy (estimated) profit to the state.
The casual reader might be tempted to conclude from this pamphlet how well the Treasury did in responding to the crisis. That is part of its purpose, no doubt. Nor would we belittle the challenges that policymakers faced in stabilizing a financial system that first froze and then came scarily close to cracking. But agency has been overhasty, we’d say, in assembling its check-list survey of post-crisis reforms, putting big, orange, mission-accomplished ticks against “improving accountability and transparency,” “ending ‘too big to fail’,” “ending taxpayer bailouts,” and “protecting consumers.”
Given how the financial-services lobby has delayed and watered down the main piece of financial-services reform legislation in the U.S. — the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act — we would have saved the check marks for when the laudable items on the list could be written definitively in the past tense. But with only 40% of Dodd-Frank’s nearly 400 provisions made final three years on from the bill’s passage, according to law firm Davis Polk & Wardwell, we are not sure that that day will ever come.