The North Mobile Post

<a href="http://www.northmobilepost.com/wp-content/uploads/2012/09/wall-street.jpg"><img src="http://www.northmobilepost.com/wp-content/uploads/2012/09/wall-street-300x225.jpg" alt="" title="wall-street" width="300" height="225" class="aligncenter size-medium wp-image-5201" /></a>

    In January of this year, President Obama formed a special task force to investigate fraud in relation to the housing collapse and the financial crisis that occurred in 2008. Thus far, there have been no criminal charges against any of the firms responsible for the financial crisis. The SEC has filed civil suits, but they will only result in monetary settlements, and not jail time.

    According to the <a href="http://www.huffingtonpost.com/2012/09/08/criminal-charges-wall-street_n_1857926.html">Huffington Post,</a> criminal charges are not likely to happen at all. Citing a source close to the investigation, the HuffPo piece states that the big bank executives will escape any criminal wrongdoing, though they will face civil charges. One Department of Justice spokeswoman said that all options were still on the table.

    There may be no avenue to pursue a criminal investigation. Most of the problems that led to the financial crisis were completely legal at the time. One of the main reasons for the real estate bubble and subsequent collapse was banks lowering their standards in order to fuel a red hot mortgage backed securities market. This lowering of standards allowed people to get homes they really couldn't afford. The mortgage backed securities were then used in all sorts of exotic financial instruments, with trillions of dollars tied in. The entire house of cards was built on quicksand.

    The housing mess would have been bad enough, but it was the secondary market that turned this into a financial crisis. One of the big questions in this mess is if financial firms really knew how bad the mortgage backed securities were, and if they willing sold garbage products to their customers. Worse still, the same firms could then turn around and profit off of the bad securities they were selling to their customers in other secondary markets.

    This shady world of investing that is quite different than the stock market most Americans are familiar with was a weakly regulated market. The derivatives market was a trillion dollar black market essentially. This is the market that caused AIG to nearly go under, and force the US government to bail them out to the tune of $180 billion.

    The sad truth is that all of these shady deals may have been legal. The Dodd-Frank financial reform bill was supposed to fix the problems that caused the collapse, but it did not go far enough. The US financial system is still vulnerable to a meltdown like the one we saw in 2008.

    Two major policies need to be implemented in order to prevent a similar situation from happening. The return of the Glass-Steagall Act, which separates commercial and investment banks, and a cap on how big these financial institutions can get. The size of the banks in this country has caused them to become a systemic risk, and thus a national security threat. Bringing back Glass-Steagall would go a long way towards preventing them from becoming the monstrosities they were before the crash, but a cap should still be put in place to make sure it doesn't happen again.

    It is unfortunate that those that caused the crisis are likely to get away with a slap on the wrist, but that is no excuse for the weak response we have given to the crisis thus far. Dodd-Frank was a decent start, but we are not done reforming the financial sector in this country. Our banks are still to big to fail, and events beyond our control (sovereign debt crisis in Europe, slowdown in China) could send our banking system to the brink again. We can't control the world economy, but we can soften the blow from future implosions.