So now taxpayers are on the hook for Goldman's merchant banking activities?

It's one thing to subsidize its proprietary trading operations. After all, we've been doing that since the Gramm-Leach-Bliley Act of 1999 did away with the distinction between investment and commercial banks. But it's quite another to cover Goldman's private equity bets.

Finally, a central banker gets it, or at least shows that he does, in this recent interview with VoxEU.

The trouble is, Axel Weber is not American, but German. And the Fed does its own thing, at least for now.

Three months after starting at long last to start selling, with much fanfare, the bad assets it took over from Bank of America, Citigroup and other troubled banks, the Treasury has two buyers that have come up with the minimum amount of capital required.

That's right, two, out of the nine that the Treasury said qualified in July.

And that's with the taxpayer taking all the downside.

Yet I distinctly remember Pimco's Bill Gross talking up the program on NPR when it was unveiled last winter, and how it was a "win-win" for taxpayers and investors alike.

Can someone please explain how big banks' earnings improved during the second quarter when mortgage delinquencies rose, according to this ?

Yes, banks like Goldman and Citi made nice trading profits, but would those have been big enough to outweigh the decline in asset values on their balance sheets that must have resulted from more mortgage loans going bad?

I've been banging the drum for more financial regulation lately, but in the case of rating agencies, less may be more, as Richard Beales over at Breaking Views points out today.

The heavily-prescribed approach that Congress is considering is beside the point in so far as the legislators propose do nothing about the inherent conflict of interest that the agencies have in getting paid by issuers for their ratings.

I've seen the growing dominance of the financial sector over the U.S. economy expressed in various ways but never as dramatically as this.

In sum, the assets of commercial and investment banks grew from 1.6 percent of GDP in 1980 to 22 percent in 2007, or, from less than a fiftieth of total output to more than a fifth inside of three decades.

I have to add my voice to Barry Ritholtz's in calling out the observation by Treasury spokeman Andrew Williams today that the Fed's expenditures on bailed out financial institutions are really just secured loans.

As Ritholz says, backed by what exactly? The Fed won't say.

If the specifics of the regulatory reform of the financial industry may still be a bit blurry, it seems to be a given that some financial institutions, especially banks, will be required to maintain higher capital ratios to curb risk.

But an increase in capital requirements for banks may not be so bad for the industry after all, according to a report published yesterday by the Pew's Financial Reform Project , which brings nonpartisan analysis on the financial industry to policy makers.

Bloomberg has been warning taxpayers that the Federal Deposit Insurance Corporation (FDIC) is going broke and that they should watch their wallets.

Chris Whalen from the Institutional Risk Analytics seems to disagree and wrote an open letter to the news organization saying it is wrong and that even in the worst financial shape, the FDIC won't run out of money.

Looks like ‘too big to fail' is here to stay.

Paul Volcker, the head of President Obama's Economic Recovery Advisory Board, said today that the administration's proposed financial reforms preserve the concept of bank bailouts. In prepared testimony for the House Finance Committee, Volcker said he backs the idea -- as long as it's applied strictly to commercial banks.