Reality makes an appearance on Wall Street

An article in New York Magazine about soul-searching on Wall Street is worth reading for more than just cheap laughs at the emo traders’ expense.

To comply with the looming regulations, banks have begun stripping themselves of the pistons that powered their profits: leverage and proprietary trading. In the wake of the crash, Morgan Stanley and Goldman Sachs converted to bank holding companies to tap the “discount window,” the Fed’s pipeline of cheap funds that gave the banks an emergency source of liquidity. That move seemed smart then, but the stricter standards required of banks have now left them boxed in.

The combination of nearly free money from the Fed and proprietary trading has allowed the very institutions most implicated in the crash to continue gambling with government money. If this is true it can’t come soon enough.