This was a surprising concept to come across in the Wall Street Journa l… the “shadow government, the financial industrial complex.” Yet, what sounds at first like conspiracy theorizing is actually a sound criticism of the fact that the US government has basically ignored the lessons of the financial crisis and is more or less gearing up for a round two.

Despite entering into the first downturn so recently, and currently watching the Greek meltdown unfold, the US economy is still a mess. Worse still, the financial system has only grown larger, more complex and interconnected, and increasingly risk-seeking in different and dangerously innovative ways.

As described by the Wall Street Journal:

“Our budget deficit is a problem, but it’s not the core issue. “Our shadow government, the financial industrial complex, is our potential Greece. High unemployment lingers, higher interest rates are on the horizon and U.S. aid to the mortgage markets is coming to an end. Government guarantees in the markets will be withdrawn leaving them exposed to the whims of confidence. “Amid that uncertain state, Wall Street is chugging along as if the last few years were merely a blip. At Citigroup Inc., the financial innovators are readying a new, complex derivative that would act as kind of financial crisis insurance. Citigroup believes the derivative, dubbed CLX, won’t put Citi or taxpayers at risk, but they concede the contracts aren’t foolproof, a story we’ve heard before.”

Leave it to Wall Street, still reeling from the fallout of an economic disaster largely brought about by synthetic financial instruments, to continue expanding its arsenal. Worried about problems with complex and nearly-foolproof mortgage and other derivatives? Don’t be. Now Citi’s put into place vastly more sophisticated financial crisis insurance derivatives. Bring ‘em on!

Confidence inspiring … indeed.

Read the full story in the Wall Street Journal’s coverage of how the Greek debt fiasco shows how little has been done to prevent the next crisis.

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