"They can't turn dross back into gold."

At the bottom ofour last thread on the financial crisis, Barbara recommends this helpful article by Robert Kuttner in the American Prospect: "Seven Deadly Sins ofDeregulation -- and Three Necessary Reforms."Kuttner reminds us that the de- and non-regulation thatled to the messhas been going on for decades. And while the theory behind the negligence belongs to the free-market zealotsin chargeof the Republican Party, thenegligence itselfwas the fault ofofficials in both parties. Kuttner writes:

What all of these sins had in common was that they led financial markets to misprice assets. In plain English, that means buyers were purchasing securities based on bad information, often with borrowed money. When firms started losing money on sub-prime in mid-2007 and other owners decided it was time to get their money out, the whole miracle of leverage went into reverse. And it spilled over into other securities that had been mispriced thanks to all the conflicts of interest tolerated by regulators.That's why, no matter how much taxpayer money the Federal Reserve and the Treasury keep pumping in, they can't turn dross back into gold. The next administration and the Congress need to return the financial economy to its historic task of supplying capital to the real economy -- of connecting investors to entrepreneurs -- and shut down the purely casino aspects of the system that have only enriched middlemen and passed along huge risks to everyone else.

Matthew Boudway is senior editor of Commonweal.

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