Felix Salmon, Reuters' widely influential blogger, sat down with Huffington Post's Ryan McCarthy at the Milken Institute's Global Conference, to talk about the SEC's case against Goldman Sachs and the future of the U.S. financial system.
(Check out Salmon's blog here.)
The SEC's civil fraud charges against Goldman Sachs wouldn't have surprised anyone had they been filed against Bear Stearns or Merrill Lynch, Salmon observed. But the "noble bank of Robert Rubin," he said, has shocked the public, and revealed Goldman to be no different than the "other traders on Wall Street who are just out to make a quick buck."
Salmon went on to suggest that the Senate subcommittee's focus in today's hearings on Goldman's shorting of the mortgage market is misguided. "That's what banks do," say Felix. "There's nothing inherently wrong about having a short position in the mortgage market."
The current proposals to establish a $50 billion fund paid by banks to absorb losses of failed financial firms won't cover the costs of the kind of large-scale meltdown that occurred over the last few years, Salmon noted. "This financial crisis certainly cost more than $50 billion dollars," Salmon said, "but [the fund] is definitely a start."
When asked whether banks will begin to be regulated more like utilities, Salmon suggested that, even with the financial reform poised to move through the Senate, the industry will have enough lobbying firepower to retain its core profit sectors.
"We will see a banking system that's more like a utility system in one year. The question is how close do we get? Do we get to a system with very boring banks like Canada where everyone can sleeps well at night, and no one has to worry about it? Or do we still have a system where banks are competing hard... and trying to be the center of financial universe, which is always going to be much more dangerous. I think that, realistically, the big banks have enough lobbying power to continue to take big risks. "
WATCH the interview: