Yes, Wall Street was corrupt. Yes, Wall Street did successfully pressure the Securities and Exchange Commission in 2004 to ease up on capital reserve requirements, letting them blow out their wallets which inevitably caused American taxpayers to back them up.

Those were all government decisions — even JPMorgan Chase’s Jamie Dimon candidly admitted the banks needed more regulation to stop their own recklessness. A laissez faire market led to laissez faire bookkeeping, to be sure.

Fake paper trades have been with us since the turn of the 20^thcentury, with the bucket shops full of them, and throughout the ‘30s, with the Congressional Pecora Commission previewing the recklessness on Wall Street today.

Market cops know you can’t legislate out of existence greed. But you can put the guardrails back up.

Forget the hand-wringing commissions. Get a market cop swinging a night stick that’s not made out of macaroni noodles. Regulators in the little Office of Thrift Supervision apparently didn’t realize they could have sued AIG, or merely threatened to, and stopped its lethal financial products division in its tracks.

But the ‘30s saw something else. It saw the dawn of the U.S.’s present housing policy, culminating in President Franklin D. Roosevelt’s 1944 address outlining a new economic bill of rights, where he said Americans have a right to a decent home, a right to health care.

Rational thinkers can debate this issue as to what the Constitution really says, that you have a right to the pursuit of happiness, which involves the pursuit of the acquisition of such items. What you should be worried about is this: Fannie and Freddie were placed into conservatorship in the early fall of 2008 and are now hostage to the government's every crisis move.

And the government just lifted the caps on their Treasury borrowings to an unlimited amount. Unlimited. Meaning they can take on all sorts of rotting mortgage paper, a mountain of which taxpayers will be staring at morosely for some time to come.

Fannie and Freddie have a combined balance sheets of more than $5 trillion, with hundreds of billions more off the balance sheet. The administration and Congress now explicitly continue to give support to the worst, most irresponsible crop of borrowers taxpayers have ever endured.

The Obama administration is putting off any effort at reforming Fannie and Freddie; pay czar Ken Feinberg has no jurisdiction over the two companies, both of which just agreed to pay their top executives up to $6 million in compensation for 2009. In cash. Not stock, as the pay czar is forcing other companies. In cash, because the executives see these companies stock at about a buck apiece.

Already, Fannie and Freddie hold or insure about 10 million subprime and Alt-A loans, as well as mortgage-backed securities, worth in total about $1.6 trillion. This stew of loans and debt is seeing record delinquencies.

The government-dependent enterprises have already cost taxpayers $110 billion in losses, they’ve already drawn down $111 billion from the Treasury, and both admit in SEC filings that they will continue to bleed money for some time to come in order to prop up the administration's effort to revivify the U.S. economy by supporting home buying.

It’s more than just rising home delinquencies. Fannie Mae just reported that the rate of serious delinquencies - those at least three months behind - on conventional loans in its single-family guarantee business rose to 4.98% in October, up from 4.72% in September - and about triple the 1.89% rate in October 2008.

Again, the Federal is now the mortgage securitization market, and now has $910.3 billion in mortgage-backed securities on its balance sheet, out of a planned $1.25 trillion in such purchases. But it can only tread water for so long. And that Fed program is set to expire next March, which means Fannie and Freddie will need an assist once that happens.

So the new Glass-Steagall rules are a step towards what former Federal Reserve chairman Volcker says what really should be done: break up the banks.

Former Fed chairman Alan Greenspan agrees. The U.K. and the European Commission are breaking up Royal Bank of Scotland and Lloyds Banking Group in deals to prop up both banks. Essentially, European banking regulators there are telling their banks if you want more taxpayer money, you've got to sell off units and Kryptonite assets.

Stop the too big to fail psychosis. The U.S. government and the banking sector have moved in the opposite direction. The banks are getting taxpayer money first, and then are breaking themselves up after the fact.