This American Debacle, Continued

The terrific reporting by Planet Money, This American Life, and ProPublica about which I wrote last week is now getting the attention it deserves. Krugman tips his hat:

According to the Pulitzer-winning investigative journalism Web site ProPublica, several banks helped market designed-to-fail investments on behalf of the hedge fund Magnetar, which was betting on that failure. …

The main moral you should draw … doesn’t involve the fine print of reform; it involves the urgent need to change Wall Street. Listening to financial-industry lobbyists and the Republican politicians who have been huddling with them, you’d think that everything will be fine as long as the federal government promises not to do any more bailouts. But that’s totally wrong — and not just because no such promise would be credible.

For the fact is that much of the financial industry has become a racket — a game in which a handful of people are lavishly paid to mislead and exploit consumers and investors. And if we don’t lower the boom on these practices, the racket will just go on.

Of course we won’t get perfect financial reform, just as we didn’t get perfect health reform. Will we get something good enough? Will we even get something that does any good? I’m not qualified to judge.

Later: Related to this, though focused on the Goldman Sachs version of the same game, see Brad DeLong’s very insightful post.

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