Ten years ago on August 9, 2007, BnP Paribas kicked off the global financial crisis by announcing it couldn’t value subprime mortgage-backed securities.  It took almost a year, but the tremors set off by this announcement turned into an earthquake along the opacity fault line in our global financial system.

The response by the global policymakers to this earthquake turned the playbook for responding to a financial crisis on its head.

Our financial system is designed so banks recognize their losses on bad assets when a financial crisis occurs.  The reason for this is simple.  If banks don’t take the losses, the burden of the excess debt is pushed onto the real economy.  This burden quickly swallows not only the economy’s ability to generate a self-sustaining recovery, but also all the available fiscal and monetary stimulus.

But this is not what happened.

Instead, our policymakers decided banks should be protected at all costs.

Completely predictably our economy is struggling to generate a self-sustaining recovery.  The burden of the excess debt is making this virtually impossible.

Not surprisingly, policymakers are declaring their decision to save the banks brilliant.  Not only that, but they are declaring it unlikely we will see another financial crisis in our lifetimes due to all the new regulations that have been written and how much better the regulators are at supervision.

This story would be believable except for one very large problem.  The global financial system is actually more opaque today than it was a decade ago.

Completely absent from the regulators response to the financial crisis was restoring transparency to all the opaque corners of the global financial system.

Bank regulators will say this is untrue.  They will point to their stress tests as proof of this.

Except there is one small problem here, nobody can confirm if the stress tests are accurate and the banks are solvent.  You see, the banks are still the black boxes they were on the day BnP Paribas made its announcement.

Recently, the UK regulators announced they were phasing out Libor.  Libor is an interest rate that in theory reflected what banks could borrow from each other at on an unsecured basis.  The regulators said the reason for phasing out Libor is there are not enough transactions to base the rate on.

No surprise.  The interbank lending market froze in 2008 when the banks with money to lend realized they could not assess the probability of getting repaid or the solvency of the black box borrowing banks.

A decade later and the interbank lending market has not unfrozen because the borrowing banks are still black boxes.

In short, the financial regulators failed to disarm the powder keg that is opacity in the global financial system.

I am not saying another acceleration of the ongoing financial crisis is imminent.  What I am saying is THE necessary condition for an acceleration in the global financial crisis to occur remains firmly in place.

What will trigger this next phase remains to be seen.

In the meantime, since Wall Street and the regulators won’t do it, the buy-side has worked to do to eliminate opacity in the global financial system.  The failure to do this will result in the buy-side losing hundreds of billions when the next phase of the crisis hits.