The Nashua (N.H.) Telegraph, Sept. 17, 2013

It has been five years since our country came to the brink of economic collapse and Congress approved $700 billion for the Troubled Assets Relief Program to prevent the collapse of insurance giant AIG and the nation's largest investment banks, all of which were deemed "too big to fail" by federal regulators and Congress.

The TARP program had its intended affect: It recapitalized the troubled investment banks and stabilized the nation's credit markets.

So it worked. The economy did not collapse and banks continued to lend.

It also violated the first principle of investing, known as moral hazard, which holds that investors who take big risks expecting equally big rewards should also bear the consequences if those investments turn sour. Or, as they might call it in your house, "letting the chips fall where they may."

In this case, the investors were those banks that acted irresponsibly and invested heavily in complex financial instruments known as derivatives, which Berkshire Hathaway Chairman Warren Buffett called "financial weapons of mass destruction."

In bailing out investment banks like Goldman Sachs, Citigroup and JPMorgan, among others, the government suspended the moral hazard principle and investment banks have been humming along, doing business as usual. Their stock prices have rebounded, the bonuses paid to Wall Street executives are higher than ever (the latest estimates put the bonus pool at about $20 billion) and most of those high-risk derivatives still are secretly traded.


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In that light, it's difficult not to see the bailout as an action akin to feeding a dog a steak after it has just bitten its trainer. Put another way, the message Congress sent to banks was that they are free to take any risk they like, because rich Uncle Sam is there to bail them out.

Must be nice.

Contrast all of this with the impact of the crisis on Main Street, where trillions of dollars in family savings disappeared, along with millions of jobs. People lost their homes, their livelihoods and, worst of all, many lost their dignity.

As the Wall Street Journal reported last week, the fact that housing prices are again rising doesn't begin to tell the story: One in six mortgage holders has a loan that exceeds the value of the home it covers. As if that wasn't bad enough, the Journal also reported that, adjusted for inflation, the average income for a typical American household is 5 percent lower than it was five years ago. That has the ring of truth.

The job market? It, too, has been rising, but the Journal reports there are still fewer jobs than there were before the financial meltdown. Then again, most people could have guessed that.

According to one study, the country's economy took a hit of at least $12.8 trillion dollars.

Which couldn't possibly happen again, could it?

Actually, it could.

The Dodd-Frank law that was supposed to prevent a recurrence and promote transparency still doesn't regulate the risky derivatives known as credit- default swaps, and Dodd-Frank itself seems hung up in rule-making purgatory.

In fact, every now and then some Wall Street hotshot has the nerve to visit Capitol Hill and urge Congress to lessen the regulatory controls on the nation's financial sector. Wall Street has no reason to fear Washington because, in the land of bulls and bears, it's as if the meltdown never happened. Perhaps that's because not one high-level Wall Street executive has gone to prison -- or even been charged -- for their role in the financial collapse.

The Justice Department claims it could find no evidence to warrant bringing criminal or civil cases against executives who magically made so much of our nation's wealth disappear, which makes us wonder just how hard they looked for wrongdoing and whether the FBI is all it's cracked up to be.

The bottom line is that the investment banks -- except for Lehman Brothers, which was allowed to fail -- suffered no moral hazard from their irresponsible investments, and the people who ran them walked away with millions in their pockets and spent no time in prison.

Five years later, there's still nothing about that which feels right.