As many have said — though not many politicians in either party — something is fundamentally amiss in a financial culture that thrives on “products” that create nothing and produce nothing except new ways to make bigger bets and stack the deck in favor of the house. “At least in an actual casino, the damage is contained to gamblers,” wrote the financial journalist Roger Lowenstein in The Times Magazine last month. This catastrophe cost the economy eight million jobs.

Wall Street describes itself as the centre for innovation that helps the economy. Yes it is indeed a centre for innovation but for practices that help only itself and that have taken the life blood out of the economy.

They have found a system that extracts value from the real economy and gives it to them.

This slide shows the scale of the skimming since the 1980's and the advent of proprietary trading and derivatives. All of this was made possible by the access by the banks to vast pools of capital. Caused in turn by the change in regulation.

The heart of the matter is capital allocation. No insurance for trading. This means that the trading and deposit taking have to be severed as they were before the change in the 1980's.

If this continues, they cannot help themselves but make a bad situation worse.

But the will is not there to do this - so, we wait for the next show to drop as it must.

Meanwhile the markets ramp up again. Will you profess to be surprised when it all crashes down again? Will you play the Casino once again, knowing that the game is rigged in the hope that you will be smart enough to get out in time? Will you get angry with the politicians then?

Goldman Sachs Group Inc. in danger of losing business with a key group of clients as a result of the fraud allegations it faces: governments in Europe and the U.S.

Politicians in the U.K. and Germany are starting to call on their governments to cut ties with Goldman, which has long been one of the top financial advisers to European policy makers.

U.K. Liberal Democrat leader Nick Clegg, riding high in opinion polls less than three weeks before national elections, said on Tuesday that Goldman "should now be suspended in its role as one of the advisers to the government until these allegations are properly looked into." His comments follow Prime Minister Gordon Brown's recent characterization of Goldman's alleged behavior as "morally bankrupt."

The SEC does not have to win their "case". What is happening is that it is now politically very attractive to punish Goldman by the simple measure of cutting them off.

Easy to do and will snowball. Imagine this conversation between the board and a CEO - "So Britain and Germany will not deal with GS because they cannot be trusted but YOU want to do our deal with them?????"

What would you do?

Finally Shame is the tool as it always is in a healthy society.

WHILE the Securities and Exchange Commission’s allegations that Goldman Sachs defrauded clients is certainly big news, the case also raises a far broader issue that goes to the heart of how Wall Street has strayed from its intended mission.

Wall Street’s purpose, you will recall, is to raise money for industry: to finance steel mills and technology companies and, yes, even mortgages. But the collateralized debt obligations involved in the Goldman trades, like billions of dollars of similar trades sponsored by most every Wall Street firm, raised nothing for nobody. In essence, they were simply a side bet — like those in a casino — that allowed speculators to increase society’s mortgage wager without financing a single house.

Gambling is legal in a few states. Most gamblers know that in the end, the House Wins. The House wins because it rigs that game so that they have to win. You can have a good day, week, month, year. But in the end the House will win.

Wall Street is Las Vegas on Steroids.

The big houses like Goldman sit in the centre of the "Flow" - they see things we can never see. They can shape the game.

And it has been a game since the 1980's The key has been capital. Prior to the 1980's, true investment banks had limited access to capital. They truly had to live on their wits. Goldman had a traditional partner structure that made the long term key and prudence essential. You only got paid out in your last 5 years from all the accumulated increase in value for the firm.

But when the status of investment banking changed and they were allowed to access outside capital, they could control the game. The temptation was too great not too.

So quickly it was the trading rooms - that had been the "barrow" boys that made the money by trading for their own account. Power shifted from the "Bankers" who used a lifetime of relationships and intelligence to do business to the people in the trading rooms who were street smart and who used the firm's capital to give them leverage.

The Bankers lost to the Brokers. The focus on the real economy shifted to the Casino.

I was in the business for 15 years - just as this transition took place and was both a broker and a banker. Regretfully I was a major proponent of the shift. Back then, I did not have the knowledge as to how this would play out. Who did?

This last week has given me some hope that the reality of what Wall Street has become is emerging into the public domain.

Time to shed even more light about the distortion and danger of the "Broker" Casino.

All power corrupts. Total power corrupts completely!

But with its latest lawsuit against Goldman Sachs, the most powerful, most feared and most envied firm on Wall Street, the S.E.C. is sending a signal that it is back on the beat and that it is going after very big targets.

In interviews this weekend, Mary L. Schapiro, the commission’s chairwoman, and Robert Khuzami, its new director of enforcement, said the agency was stepping up both its rule-making and its investigations in the wake of the financial crisis.

The British executed Admiral Byng for not being agressive enough. Voltaire quipped "in this country, it is wise to kill an admiral from time to time to encourage the others"

So with Goldman Sachs. By taking on Goldman in one case that the SEC have a good chance on, the whole pack of cards which is the Global Casino could tumble. You can feel how for instance the UK Government, on the hook for billions in bailout to RBS, a "victim" of Goldman; how the German Government, on the hook for Greece, another Goldman "client" are gearing up as they follow the case.

The regulator's ambition, to wound Goldman so badly that the rest will get the message.

A regulator cannot look at every deal. But if it is clear that they will make examples, then the real risks for the player reach a level where some caution is merited.

No British Admiral after Byng for 150 years made the same mistake of caution in the face of the enemy. Byng's execution worked.