Frank Partnoy, Unsung Hero

Frank Partnoy is one of America’s unsung heroes. Why he isn’t better known remains a mystery to me. Or perhaps it's not much of a mystery at all, since in truth only a few people in the country are actually smart and sophisticated enough to fully understand what Partnoy has been warning Americans about for nearly two decades.  The difficult-to-comprehend warnings that Partnoy issues in his brilliant new Atlantic cover story co-authored with Jesse Eisinger—“What’s Inside America’s Banks?” – are similar to what this Wall Street cowboy-turned-Cassandra has been saying since 1997, when his book Fiasco came out and he first sought to alert the U.S. public that they were getting shafted by banks in the most sophisticated confidence game in history: OTC derivatives.

The problem today, four years after the worst financial crash in U.S. history (yes, you read that right: worse than 1929),  is very similar to what Partnoy has been trying to tell us about for 16 years, ever since he left Morgan Stanley to start on his truth-telling mission: a near total-opacity, a lack of transparency in banking that befuddles even the most sophisticated financial investors. THEY COST THE AMERICAN ECONOMY THE BIGGEST DOWNTURN SINCE THE '30S, AND YET WE STILL DON’T KNOW WHAT THE BIG BANKS ARE DOING, FOLKS!   As I posted last July, after Sandy Weill’s astonishing conversion from mega-mind of Citibank to meek champion of a new Glass-Steagall, the biggest U.S. banks are only getting bigger and more dangerous. According to Federal Reserve officials quoted by Bloomberg last spring, five banks — JPMorgan Chase, Citigroup, Bank of America, Wells Fargo, and Goldman Sachs — now hold assets equal to more than half the size of the entire U.S. economy ($8.5 trillion, or 56 percent). That's vastly larger than the proportion controlled by these same banks before the financial crisis (43 percent). The banking behemoths are now about twice as big as they were a decade ago.

Wall Street has Washington -- and America -- by the nuts. And the most pathetic part about it is we don't even know it. Will somebody please listen to Frank Partnoy at long last?