History News Network Reviews Harcourt's Latest Book

Review of Review of Bernard E. Harcourt's "The Illusion of Free Markets: Punishment and the Myth of Natural Order"
Eric Laursen
History News Network
September 8, 2011

Eric Laursen is an independent journalist living in western Massachusetts. He is co-author of Understanding the Crash (Soft Skull Press/Counterpoint, 2010) and author of the forthcoming The People’s Pension: The War Against Social Security from Reagan to Obama (AK Press, Spring, 2012).

Last December, Wall Street's leading banks were fighting tooth-and-nail to keep federal regulators from setting rules governing the vast market in financial derivatives contracts – the market that helped turn the 2008 mortgage-backed securities meltdown into a global catastrophe. The regulators were developing rules to implement the Dodd-Frank financial reform bill – rules that, among other things, were supposed to make the derivatives market more transparent.

Then an article appeared in the New York Times that seemed to blur the outline of this reform scenario. Titled “A Secretive Banking Elite Rules Derivatives Trading,” the article, by Louise Story, detailed how nine big banks had virtually captured the new regulatory regime before it even got started. One of Dodd-Frank's provisions called for most derivatives to be traded via clearinghouses, putting buyers and sellers in closer touch with each other and cutting out middlemen.

According to Story, nine big banks, including