Is "Too Big to Fail" Gone Forever?

In September 2008, it was reported that Hank Paulson, then Treasury secretary and a former Goldman Sachs boss, knelt before House Speaker Nancy Pelosi, the archenemy of George "Dubya" Bush -- Paulson's boss -- and literally begged her not to break up a proposed deal to bail out the nation's financial system. This image best illustrates the insanity of the few weeks when the world changed.

And change it did
America's unemployment rate has shrunk from its peak of 10% in 2009, but millions still remain out of work. And an untold number of people are underemployed, working part-time at jobs beneath their skill level. Home foreclosures have slowed, but many communities remain blighted by the vacant, bank-owned properties that make easy targets for squatters and vandals. No city better symbolizes the effects of the financial crisis than Detroit -- the auto industry and Motown capital that recently declared bankruptcy and looks unlikely ever to return to its former glory.

But for some, not much has changed. The CEOs and others that placed their huge bets on complex derivatives? Some may have left their posts, but they still managed to deploy golden parachutes, raking in millions of dollars. They still get to enjoy estates in the Hamptons and Vail winter getaways. The 1% remain just that, and they're even more ahead of the curve than they were before.

And the proposed legislative changes to prevent a meltdown like this from ever happening again? Well, good luck with that. The pride and joy of the Dodd-Frank reforms was the Volcker Rule. Named after former Fed Chairman Paul Volcker, this policy would prevent banks from making investment bets from their own money – the same type of bets that caused them to lose trillions of dollars and need bailouts in the first place.

Source: Photodune.

However, five years after The Great Recession came into our lives, the Volcker Rule is far, far away from being finalized. Five separate government agencies are charged with the task of creating the final language of the Volcker Rule -- and the Securities and Exchange Commission, the Commodities Futures Trading Commission, the Federal Reserve, the Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency all have their own agendas.

On top of that, they're also mandated to incorporate public comments into their discussions. That public includes the investment banks they're charged with regulating. Those banks and their associations and lawyers have flooded the agencies with their (often legitimate) concerns.

It has taken forever, and we're nowhere near done.

On the bright side, the stock market has returned to glorious heights, with the Dow Jones Industrial Average (DJINDICES: ^DJI  ) recently eclipsing 15,600 and other indexes also surging. But at the same time, Main Street -- the street you most likely walk on -- still struggles.

So what can we learn from this?
It's up to us to get educated on investing our money. Investing is, and will forever be, a great thing. But it's difficult and intimidating. Too many people jump into the fray, randomly picking a few stocks without knowing a thing about fundamental analysis or technical trading factors. Too many people don't know the difference between actively managed mutual funds and index funds -- and how the difference affects the bottom line. Too many people trust the hot stock picks of whatever analyst got some face time on CNBC, as opposed to sitting down to do the research or finding trustworthy, smart people who have already done the work.

Just today, a reputable economist who had predicted the financial crisis, Manuel Hinds, took measures that signified his concerns for the short-term economic future. If we are to face another "2008,″ we had better get ourselves protected. And the best protection is knowledge.

Start investing now
Millions of Americans have waited on the sidelines since the market meltdown in 2008 and 2009, too scared to invest and put their money at further risk. Yet those who've stayed out of the market have missed out on huge gains and put their financial futures in jeopardy. In our brand-new special report, "Your Essential Guide to Start Investing Today," The Motley Fool's personal finance experts show you why investing is so important and what you need to do to get started. Click here to get your copy today -- it's absolutely free.


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