Economic reform?

Why are the stock markets doing so "well" lately? Clearly, it's not because the businesses whose shares the markets trade are posting increased profits. Some of the increase in stock prices may be accounted for by the falling value of the dollar — as the dollar weakens, it takes more dollars to buy anything — but that's not the whole story.

Who, we may wonder, is bidding up the price of stocks, and where are they getting the money to do it in this economic environment? Look no further than the investment branches of our banking behemoths, using cheap, government guaranteed credit. To me, it's looking like another bubble — and given the poor shape of a lot of American businesses, it seems pretty obvious that their price to earnings ratios over the past few months have been falling like it's the nineties again.

A lot of people are blaming a handful of conservative Democratic senators for the lame, half baked efforts coming out of Congress for reforming the financial system. I suppose they have their part to play, but the real fault lies with the White House.

If the Obama administration genuinely wanted to bring Wall Street to heel, it could be making a far more aggressive effort than we've seen. Fiddling with executive pay packages may score a few populist points, but in the long run (or even the short run), it means nothing. Some of us remember that the whole corrupt bonus system arose out of efforts to rein in executive pay during the Carter administration.

As for regulating derivatives, there are enough holes in the proposed legislation to accommodate every rat looking for a way through — and damned near as many in the proposal for the consumer protection agency. Instead of breaking up the institutions that were "too big to fail," government has helped them grow even larger through mergers and acquisitions.

Paul Volcker has been out there, crying in the wilderness for genuine reform — rolling back the Clinton administration's gutting of whatever remained of Glass-Steagall, and separating banking's commercial and investment sectors again. The White House will not be doing that anytime soon — at least not as long as two of the three Clintonistas who engineered that gutting remain in power. Robert Rubin may be gone, but he left Larry Summers and Tim Geithner behind to look after the interests of the Wall Street power brokers.

Well, viva Volcker. The White House is ignoring him, but at least he's getting some attention in the press.