I’m forever blowing bubbles,

Pretty bubbles in the air.

They fly so high,

Nearly reach the sky,

Then like my dreams,

They fade and die

-1918 lyrics by James Kendis, James Brockman and Nat Vincent

I own a copy of a wonderful cartoon, “Wall Street Bubbles — Always the Same,” printed in 1901 by Puck magazine, that blames J.P. Morgan for causing a stock market crash. It is a caricature of Morgan as a bull, blowing bubbles — inflated values — for which a group of people are grasping. The cartoon’s message of the damage Wall Street’s big banks can do is timeless.

We are still suffering from the latest stock and real estate bubbles caused when the big banks created spurious stock research reports, created and sold overpriced mortgage-backed securities and came up with toxic derivative securities.

Blowing bubbles rewards handsomely. On Oct. 12, the Wall Street Journal reported that some three-dozen top banks and securities firms will pay $144 billion in salary and benefits in 2010, a record level. Goldman Sachs in 2009 paid an average of $500,000 to its 32,000 workers (a total of $16 billion).

The recently expired Troubled Asset Relief Program exposed a disagreement between most academics and the man on the street. The majority of economists believe the massive federal bailouts that started in 2008 saved the country from a financial meltdown. But the public disliked Washington’s bagful of financial bailouts, believing that they aided just a few institutions, expanded government power and insulated people from paying for their own mistakes.

Some economists, such as Dean Baker, co-director of the Center for Economic and Policy Research in Washington, criticized TARP because it lacked stringent conditions, such as the requirement that big banks be broken up and restrictions on bank CEO pay.

The government’s policies have promoted a top-heavy banking system. Starting in the 1980’s, it approved nationwide banking after many decades of sanctioning only statewide banks. In 1999, it overrode the Glass Steagall Act, which separated commercial and investment banks. And in 2007 it eliminated a federal deposit cap limiting banks to having less than 10 percent of all U.S. deposits.

The four largest banks — Bank of America, JP Morgan Chase, Citigroup and Wells Fargo — now control more than 40 percent of all U.S. deposits. At the opposite end of the spectrum, approximately 8,300 banks share the remaining 60 percent.

The 2010 Dodd-Frank Wall Street Reform and Consumer Bill kept the status of super-sized banks. But it did give the federal government significantly more regulatory power over them.

The bill’s major provisions:

Empowered federal regulators to seize and dismantle troubled financial firms whose collapse could cause systemic failures.

Established the Consumer Financial Protection Bureau, which will enforce existing consumer-oriented regulations over big financial firms and mortgage-related businesses.

Required firms that bundle mortgages into pooled investment instruments to keep at least five percent of these instruments on their books (Skin in the game).

Many Americans today feel the distrust and dislike for big banks portrayed in the Puck magazine cartoon.

The big banks lack ties with the local communities, compared with the deep roots of executives with small local banks. The Independent Community Bankers of America trade group noted that community banks account for almost a third of business loans under $1 million.

I was just a child when I first bellowed the refrain, “I’m forever blowing bubbles.”

After all these years, and a career as a Wall Street professional, I am still stunned that bubbles created by the financial firms could cast a cloud over our capitalist system, contributing to 50 million unemployed and underemployed workers, home-price declines of 30 percent from peak levels and stagnant incomes for the middle class.

Originally published in the Sarasota Herald-Tribune