Banks vs. American People - Can Wall Street Reform Be Done?

[Guest August]

A too big to fail bailout kill financial reform strategy time line of reveals all:

 

In a 17-page memo titled, "The Language of Financial Reform," Luntz urged opponents of reform to frame the final product as filled with bank bailouts, lobbyist loopholes, and additional layers of complicated government bureaucracy.

 

"If there is one thing we can all agree on, it's that the bad decisions and harmful policies by Washington bureaucrats that in many ways led to the economic crash must never be repeated," Luntz wrote. "This is your critical advantage. Washington's incompetence is the common ground on which you can build support." - Sam Stein, Huffington Post, 02/01/10

 

About 25 Wall Street executives, many of them hedge fund managers, sat down for a private meeting Thursday afternoon with two of the most powerful Republican lawmakers in Congress: Senate minority leader Mitch McConnell of Kentucky, and John Cornyn, the senior senator from Texas who runs the National Republican Senatorial Committee, one of the primary fundraising arms of the Republican Party.

 

The stated topic of the meeting: The Financial reform bill being sponsored by Senator Chris Dodd, the Democrat and chairman of the senate banking committee. Both McConnell and Cornyn listened to numerous complaints the executives have with the bill. These included complaints about provisions that allow the government to continue to prop up financial institutions that are too big to fail. Fox Business, 4/12/10

 

So last week I came to the floor to point out the flaws that resulted from this partisan approach. One of the biggest of these were [sic] the creation of a $50 billion bailout fund. It seemed to me, and many others, that the very existence of this fund would perpetuate the same kind of risky behavior that led to the last crisis. - McConnell Floor Speech, 4/19/10

[Guest LAW]

According to Senate Minority Leader Mitch McConnell, somehow Senator Chris Dodd's Wall Street reform legislation is pro-bailout. "If you need to know one thing about this bill, it's that it would make it official government policy to bail out the biggest Wall Street banks," said McConnell. Dodd rose to set the record straight on McConnell's claims today. "Suggesting somehow that there's a bailout provision in this bill -- nothing could be further from the truth," Dodd explained. "The bill, as drafted, ends bailouts. Nothing could be more clear in the legislation. And let me tell you how we do it...This bill imposes tougher standards on large, risky Wall Street firms. It eliminates the federal government's capacity to bail out financial companies and it requires that the financial firms write their own shut down plans an even pay for the liquidation process if it's needed."

 

[Guest ROFLMAO]

Oh this is too funny not to post. The GOP released this video before Republican Senator Corker made his financial reform is not a bailout comment. The big elephant party needs to get their act together.

 

[Guest LAPD]

You're going to see some GOP backtracking in the very near future: if Republicans don't want a industry-financed guarantee against "too big to fail" institutions, where is the money going to come from once they DO fail again?

Answer: taxpayers (again).

 

It seems to me that if these banks fail again, with no real "overhaul" and the taxpayers have to foot the bill again, John Q. Public is going to be very, very upset with the GOP.

 

What do Republicans want, other than to be obstructionists? They love to rant about this and that, but what do they REALLY want? Less strict gun laws? Obama not to "snatch away their freedoms and make them slaves" (give me a break ...)

 

The Republicans don't want a self-financed guarantee the big boys won't fail again (because then the big boys would actually have to PAY for it!!), they want "business as usual" on Wall Street; and that I do guarantee...

[Luke_Wilbur]

Show me the Money!!!

 

Edited April 21, 2010 by Luke_Wilbur

[Guest LAW]

Statement of Treasury Secretary Geithner

On Senate Agriculture Committee Passage

On Financial Reform Bill

 

WASHINGTON – The U.S. Department of the Treasury today released the following statement from Secretary Tim Geithner on the Senate Agriculture Committee's passage of the The Wall Street Transparency and Accountability Act of 2010:

 

"Today, the Senate took another step towards comprehensive financial reform. Under Chairman Lincoln's strong leadership, the Senate Agriculture Committee voted out a bipartisan bill that will bring derivatives trading out of the dark, provide strong oversight of market participants, and combat fraud, abuse and manipulation. Chairman Dodd's comprehensive and tough legislation has already passed out of the Senate Banking Committee. We will continue to work with Chairman Dodd, Chairman Lincoln, and Senate leadership to craft strong derivatives provisions that close loopholes, provide necessary transparency, and reduce threats to financial stability as part of a final, comprehensive financial reform bill."

[Guest American For Progress]

"We cannot let the narrow interests of a few come before the interests of all of us," President Obama said last year in a call for "an overhaul of U.S. financial regulations." Buoyed by success in the long battle to pass comprehensive health care reform behind them, Congress has set its sights on reining in Wall Street's recklessness and providing new protections for consumers, reducing risk, and increasing transparency. The bill introduced by Senate Banking Committee chair Chris Dodd (D-CT) "would create a new consumer protection bureau within the Federal Reserve to guard against lending abuses," "create oversight of the enormous derivatives market,"and "give the government authority to wind down large, troubled financial institutions in an orderly way." If institutions that are "too big to fail" repeat the kind of disastrous behavior that sent the global economy into a tailspin in 2008, "the Senate bill gives the government the authority to wind down the firm with no exposure to the taxpayer," Treasury Secretary Timothy Geithner described. "No more bailouts. Instead, we will have a bankruptcy-like regime where equityholders will be wiped out and the assets will be sold." The legislation's wind-down provisions are similar to the insurance fund and resolution authority that the FDIC has to safely shut down smaller banks, and the fund is paid for by big banks, not taxpayers. Since September, Dodd has tried to work with committee Republicans Richard Shelby (AL) and Bob Corker (TN) to find bipartisan consensus. However, as a vote grows near, Republicans have been on the attack. Last week, Senate Minority Leader Mitch McConnell (R-KY) declared his opposition to the financial reform bill, claiming that it "institutionalizes...taxpayer-funded bailouts of Wall Street banks" and would give the Federal Reserve "enhanced emergency lending authority that is far too open to abuse."

 

MCCONNELL'S 'BAILOUT' LIE: McConnell has touted his opposition to financial regulation by pretending to speak on behalf of American citizens, opposing "bailouts" and "abuse." As Time's Adam Sorensen noted, McConnell's attack made "the exact argument pollster Frank Luntz urged Republicans to make earlier this year in a widely publicized memo." Luntz told the GOP to attack reform as "bailouts" and blame "Fannie Mae, Freddie Mac, the Federal Reserve" for creating the "bubble." A number of other Republicans -- including House Minority Leader John Boehner (R-OH) -- have repeated this false right-wing talking point. However, the disingenuous attempt at populist posturing to kill reform has fallen flat. CNBC's Ron Insana laughed when trying to explain McConnell's views, and MSNBC's John Harwood said that "Senator McConnell's argument is a little silly when you look at the text of the bill." Time's Mark Halperin told MSNBC's Joe Scarborough, "They are willfully misreading the bill or they are engaged in a cynical attempt to keep the president from achieving something." On Monday, Corker called his leader's attacks "silly," saying that the fund he designed with his colleague Sen. Mark Warner (D-VA) "is anything but a bailout." Yesterday, fellow banking committee member Sen. Judd Gregg (R-NH) praised the resolution authority as a "good approach." Following an in-depth analysis, the nonpartisan PolitiFact rated McConnell's claim that the financial regulation bill "actually guarantees future bailouts of Wall Street banks" completely false.

 

IN BED WITH WALL STREET: McConnell did not mention in his attack on Wall Street regulation that the week before he traveled alongside National Republican Senatorial Committee chairman Sen. John Cornyn (R-TX) to New York City for a private meeting with elite hedge fund managers and other Wall Street executives. The purpose of the meeting between the top Republicans and the financial executives was to enlist "Wall Street's help" in funding Republican campaigns in the fall and killing any tough financial reform. McConnell takes more money from the finance industry than any other sector. He has taken $1,147,924 for his current re-election campaign, including PAC contributions from megabanks like Citigroup and Bank of America. When pressed by reporters for details about his meetings on Wall Street, McConnell repeatedly refused to discuss the matter. But as the Wall Street Journal reported in February, Republicans have been "stepping up their campaign to win donations from Wall Street," "striving to make the case that they are banks' best hope of preventing President Barack Obama and congressional Democrats from cracking down on Wall Street." In a January meeting, Boehner told JP Morgan CEO Jamie Dimon that "congressional Republicans had stood up to Mr. Obama's efforts to curb pay and impose new regulations." Since 2009, contributions from JP Morgan, Citigroup, and Bank of America have all "trended toward Republicans." Hedge funds similarly shifted, going "from giving 2 to 1 to Democrats at the start of 2009 to providing almost half of its donations to Republicans by the end of the year."

 

MCCONNELL FOLDS, FOR NOW: Yesterday, a battered McConnell abandoned his "bailout" lie, saying, "I'm convinced now there is a new element of seriousness attached to this, rather than just trying to score political points. ... I think that's a good sign." The change in tone came, the Washington Post writes, "as the Security and Exchange Commission's lawsuit against Goldman Sachs for allegedly defrauding investors continued to dominate headlines, underscoring public anger at Wall Street and reminding lawmakers of the potential consequences of inaction." Senate Majority Leader Harry Reid (D-NV) said yesterday that he plans to "wait until early next week to introduce the financial overhaul package on the Senate floor," to give Dodd and Shelby "more time to try to reach a compromise." However, hurdles to cleaning up the financial industry remain. "I think there's a continuing tension in the caucus between those who hold out hope for meaningful and sincere bipartisan negotiations," Sen. Sheldon Whitehouse (D-RI) said, "And those who see Lucy yanking the football away from Charlie Brown for the umpteenth time." Economist Paul Krugman is similarly concerned that the White House isn't taking seriously the "possibility that Republicans will filibuster financial reform." Sen. Bernie Sanders (I-VT)warns that the fine print of the final legislation will determine "whether the Congress has the ability to regulate Wall Street or Wall Street continues to regulate the Congress." Lobbyists are fighting the effort by Sen. Blanche Lincoln (D-AR) and Sen. Maria Cantwell (D-WA) to bring transparency and price discovery to the shadowy derivatives market. Tomorrow, the President will go to New York City to begin the final push, reminding "Americans what is at stake if we do not move forward with changing the rules of the road as a part of a strong Wall Street reform package." It has been three years since the over-inflated housing market began to crash. It has been a year and half since the Wall Street meltdown and over a year since Treasury rolled out its principles for reform. It's time to get this done.

[Guest HUMAN]

How about this?

 

Where in gods green earth IS FANNIE MAE and FREDDIE MAC in all of this?

 

It's the Evil banks, but Fannie and Freddie get a free ride in all of this.

[Guest Luke]

I agree. What is the Federal Housing Finance Agency (FHFA) doing? They regulate Fannie Mae and Freddie Mac.

 

Just to rekindle everyone's memory:

 

If you do not have time to read all of this. Just read the words in bold. The White House knew the financial markets were going to crash months ago.

 

We wanted to see if there were ways to contain this problem in the financial markets, and to deal with it very directly with the root causes with a lot of the housing programs that we initiated, shoring up Fannie May and Freddie Mac, which took far longer than we certainly hoped. You've heard us talk about the fact that we've tried to shore up Fannie Mae and Freddie Mac for years now. And I'll remind you, going back to August of 2007, the President personally came out where he announced a number of housing related reforms that we were proposing, called on Congress to reform Fannie Mae and Freddie Mac. It took nearly a year to get the housing bill that he called for and the reform of Fannie Mae and Freddie Mac passed through Congress.

 

Two of the leading purchasers of mortgage-backed securities were Fannie Mae and Freddie Mac. Because these companies were chartered by Congress, many believed they were guaranteed by the federal government. This allowed them to borrow enormous sums of money, fuel the market for questionable investments, and put our financial system at risk.

 

I want to know if Daniel H. Mudd is going to prosecuted. After being dismissed from Fannie Mae in September of 2008, little is known of his whereabouts. Although the political party of Mudd is unknown, according to records he did donate money to Bush in 2004. The government said that his severance package will not be paid.

 

All the major villains, it turns out, have one thing in common: government.

 

That's right. From the "Community Reinvestment Act" that pressured banks into affirmative-action lending, to those "government-sponsored enterprises" Fannie Mae and Freddie Mac -- who bought up all the resulting subprime loans and repackaged them as "investment grade" securities -- the greasy thumb-prints of government were all over this fiasco from beginning to end.

 

Ground zero of today’s economic crisis was irresponsible mortgage lending by government-backed enterprises, most notably Fannie Mae and Freddie Mac,” explains Bob Barr, the Libertarian Party candidate for president. “Yet, Freddie Mac spent extravagantly to prevent Congress from imposing even loose controls over its operations. We need a full and open investigation of Freddie Mac’s lobbying practices, which have cost the taxpayers so much money,” notes Barr.

 

“The role of Democrats Barney Frank and Chris Dodd in protecting Fannie and Freddie from meaningful federal oversight is well-known. But now increasing information is coming out on Freddie Mac’s lavish payments to Republican Party consultants to protect the organizations as they drove the entire U.S. economy into the ground,” observes Barr.

 

“Sen. John McCain has personally called for reform of Freddie Mac, but he has surrounded himself with lobbyists dedicated to picking the public’s pockets,” Barr notes. “Normally companies have a perfect right to hire lobbyists, even to try to pick the public’s pockets, but Freddie Mac was a government-sponsored enterprise, with special privileges, including implicit government backing for its activities,” says Barr.

 

“Between 2000 and 2005, Freddie Mac paid Rick Davis, Sen. John McCain’s campaign manager, nearly $2 million to run the so-called Homeownership Alliance to oppose restrictions on Freddie’s ability to promote mortgage lending with implicit government backing. After closing this front group, Freddie Mac paid Davis’s lobbying firm, David Manafort, nearly a half-million dollars. Those payments, of $15,000 a month, only ceased in August,” Barr notes.

 

Barr also states that Mark Buse, Sen. McCain’s chief of staff, once worked at Freddie Mac, and “his lobbying group, ML Strategies, collected $460,000 between 2003 and 2004. All of that was spent to put taxpayers on the hook for ever-more expansive lending in the housing market,” explains Barr. “And nearly $3 million went to the firm of William Timmons between 2000 and 2008. Sen. McCain has tapped Mr. Timmons to manage his transition to the White House if he wins the presidency,” adds Barr.

 

“The latest revelation is that Freddie Mac paid the lobbying firm DCI $2 million to kill reform legislation authored by Sen. Chuck Hagel (R-Neb.). DCI is headed by Doug Goodyear, who managed the Republican National Convention. DCI focused its efforts on Republican Senators, and in 2005, Sen. Majority Leader Bill Frist refused to bring the Hagel bill up for a floor vote. DCI’s efforts helped block what might have been the last best hope to stop today’s housing debacle,” explains Barr.

 

“We need an independent investigation of the money spent and tactics used by Freddie Mac and Fannie Mae that enabled them to so abuse the public trust. That investigation will become even more important if Sen. McCain wins the presidency. So far, the taxpayers have been stuck with a bailout bill that exceeds $2 trillion, and the cost is likely to rise even further," observes Barr.

 

"Those who are responsible for today’s economic mess must be held accountable, and not granted special access,” insists Barr.

 

Libertarian Party presidential candidate Bob Barr represented the 7th District of Georgia in the U. S. House of Representatives from 1995 to 2003.

[Guest ALWAYSRED]

Government sponsored enterprises Fannie Mae and Freddie Mac were the source of the greatest taxpayer losses.

[Guest GHarry]

Fannie Mae and Freddie Mac provide more than $6.2 trillion in funding for the U.S. mortgage markets and financial institutions.

[Guest DC Government Worker]

Statement of Edward J. DeMarco, Acting Director, Federal Housing Finance Agency Before the U.S. House of Representatives Committee on Financial Services On “Compensation in the Financial Industry – Government Perspectives” February 25, 2010

 

During FHFA’s intense preparations for placing the Enterprises into conservatorship, we received some valuable insights from discussions we had with the Federal Deposit Insurance Corporation (FDIC). The FDIC’s experience in bank failure resolutions, including conservatorships, supported our view that achieving the goals of conservatorship depended on retaining capable and knowledgeable staff at the Enterprises. At the same time we sought to no longer employ those executives most responsible for the conditions leading to our action. As a part of our planning process, we hired Hay Group, a well respected executive compensation consultant, to help us design a plan to encourage the best employees to stay, while not rewarding poor performance.

 

In placing the Enterprises into conservatorship, our foremost concern was that their troubled condition was leading them to withdraw their services from housing finance markets at a time when they were greatly needed. Their combined market share in 2008 was more than double what it had been two years earlier, as most other participants went out of business or sought to avoid new risk exposure to the mortgage market. For the sake of our country’s economy and especially its housing sector, it was essential that the Enterprises continue to bring liquidity, stability, and affordability to the secondary mortgage market. Furthermore, the Enterprises’ enormous size, including $5.4 trillion of mortgage credit risk, and taxpayer exposure to that risk in the face of rapidly deteriorating housing markets, made it imperative that the Enterprises strengthen their management in the areas of risk control and loss mitigation. In addition, it was and remains imperative that the Enterprises attract and retain the particular and specialized skills needed to manage these activities.

 

To address these concerns, FHFA discussed our retention approach in some detail with

both new Chief Executive Officers (CEOs) on the day before their new jobs officially

began. As former FHFA Director Lockhart reported to this Committee later that month,

both CEOs agreed with our view of the importance of such a plan, and over the next few

weeks worked with us, Treasury, and Hay Group to customize plans for their respective

institutions. Director Lockhart justified the resulting plans in a letter to Chairman Frank,

which is attached. Payments under the plans were virtually the only non-salary

compensation for Enterprise employees for the 2008 performance year, as no bonuses

were paid for that year at either Enterprise.

 

The directors and senior executives tied to the financial collapse at each Enterprise are no

longer with the companies. The senior executives who remain as well as those that were

recently hired are essential to the Enterprises fulfilling the important goals of the

conservatorships. As FHFA has stated since the outset of the conservatorships, it is

critical to retain existing staff, including many senior managers, and critical to attract new

executive management to fill the vacancies. The challenge of meeting this goal with

companies in conservatorship is immense. The Enterprises operate with an uncertain future that will be the source of much public debate. As conservator, I believe it is

critical to protect the taxpayer interests in the Enterprises by ensuring that each company

has experienced, qualified people managing the day-to-day business operations in the

midst of this uncertainty. Any other approach puts at risk the management of more than

$5 trillion in mortgage holdings and guarantees that are supported by taxpayers through

the Treasury Senior Preferred Stock Purchase Agreements.

[Guest ALWAYSRED]

You're going to see some GOP backtracking in the very near future: if Republicans don't want a industry-financed guarantee against "too big to fail" institutions, where is the money going to come from once they DO fail again?

Answer: taxpayers (again).

 

It seems to me that if these banks fail again, with no real "overhaul" and the taxpayers have to foot the bill again, John Q. Public is going to be very, very upset with the GOP.

 

What do Republicans want, other than to be obstructionists? They love to rant about this and that, but what do they REALLY want? Less strict gun laws? Obama not to "snatch away their freedoms and make them slaves" (give me a break ...)

 

The Republicans don't want a self-financed guarantee the big boys won't fail again (because then the big boys would actually have to PAY for it!!), they want "business as usual" on Wall Street; and that I do guarantee...

 

Congressman Boehner (R-West Chester) today released the following Web video highlighting President Obama’s financial regulation bill that will impose burdensome regulations and new fees on local banks in Ohio’s 8th District, while rewarding top Democratic contributors and promising permanent bailouts to Wall Street companies deemed ‘too big to fail.’ Excerpts from the video are provided below:

 

 

“The American people have made it clear that they’ve had enough of the bailouts and all the open-ended expansion of government in Washington.

 

“But instead of listening, President Obama and the majority party in Congress continue to scheme up new costly policies that will make bailouts permanent, kill jobs and impose new burdens on taxpayers.

 

“President Obama likes to say we need to clean up Wall Street. But let’s be clear: he is pushing a bailout bill for Wall Street that is supported by and benefits one of his top campaign contributors – a financial firm that just happens to be under investigation by the SEC for defrauding investors.

 

“House Republicans are standing with the American people and fighting to end the bailouts once and for all. Our alternative plan will protect taxpayers, consumers and investors, and get the government out of the business of picking winners and losers in the private sector.”

 

NOTE: Washington Democrats’ bailout bill does nothing to reform Fannie Mae and Freddie Mac, the government mortgage companies that sparked the financial meltdown by giving too many high-risk loans to people who could not afford it. House Republicans’ plan would phase out taxpayer subsidies of Fannie Mae and Freddie Mac over a number of years and end the current model of privatized profits and taxpayer losses.

[Guest Jakarta Globe]

Singapore. A top Asian fund manager said on Wednesday the civil fraud allegations against massive Wall Street bank Goldman Sachs was a smokescreen to divert attention from the financial crisis in the United States.

 

Goldman is being investigated for fraud by the Securities and Exchange Commission and Britain’s market watchdog.

 

It has also been learned that banks here in Asia are using the US bank’s woes to get an edge on multimillion-dollar fee-paying deals in the region.

 

Marc Faber, who runs Hong Kong-based fund manager Marc Faber, described the lawsuit against Goldman Sachs as a hunt for scapegoats amid economic problems faced by the US.

 

“The target now is Goldman Sachs. You distract the masses with a villain,” he said at the Asian Public Real Estate Association Forum in Singapore. Goldman’s leading role on Wall Street, coupled with massive paychecks to staff and bumper profits, make it an obvious target, Faber said.

 

Rival institutions in Asia were seizing on Goldman’s problems to try and elbow in front of the bank on major upcoming deals, sources familiar with the matter said.

 

Investment bankers have been lobbying executives at state-owned Agricultural Bank of China and pushing officials in Beijing to drop Goldman as an underwriter for the bank’s more than $20 billion IPO.

 

Rivals are also asking officials at state-controlled Bank of Communications to ditch Goldman from its joint global coordinator role in the Chinese bank’s $6.1 billion rights issue, the sources said, though there was no evidence either bank was considering pushing Goldman aside.

 

Meanwhile, Paulson & Company, the hedge fund linked to civil fraud charges against Goldman Sachs, has moved to head off investor concerns about its role in a deal that has scarred the reputation of the famous Wall Street bank and overshadowed blow-out quarterly earnings.

 

Goldman is accused of defrauding investors by failing to say that prominent hedge fund manager John Paulson bet against a Goldman subprime debt product that he helped design.

 

Paulson, sources have revealed, has made telephone calls and sent letters to his big investors this week telling them that neither he nor anyone else at the fund had received notice indicating that charges might be filed against it or Goldman Sachs.

 

Paulson & Company, which earned $15 billion by correctly betting in 2007 that the US housing market would collapse, declined to comment.

 

Experts said the case and the response showed Goldman’s traditional strategy of keeping news media and critics at bay behind a wall of silence was no longer valid. “They can’t play that game anymore,” said Michael Robinson, a consultant at Levick Strategic Communications. “The world has changed too much.”

 

Goldman on Tuesday reported its first-quarter net income nearly doubled to $3.29 billion, bolstered by strength in fixed income trading and principal investments. The bank reported its lowest-ever first-quarter compensation ratio, but still set aside $5.5 billion for compensation and benefits in the period.

 

The reduction in money set aside served to bolster earnings that could bring more public scrutiny to the 141-year old bank.

 

http://www.thejakartaglobe.com/business/claim-that-goldman-probes-are-politically-motivated/370756

[Guest Truthseeker]

Paulson Investment Company, Inc. is not affiliated with the New York based hedge fund, Paulson & Co., or with Founder and President, John Alfred Paulson.

 

http://www.paulsoninvestment.com/

[Guest Sara]

The stability of our democracy depends on a solid middle class- not a looted middle class, demoralized as their basic retirement safety is gutted by manipulated markets and the transfer of immense wealth to a small class of plutocrats and con men.

 

This financial bloat will surely kill the goose that has laid the golden egg of 20th century American life. Our infrastructure, health systems, education and communities will wither. Transferring all wealth to the top 1% creates banana republics, Calcutta and squalid cities.

Rationalizing the current wild ride of market opportunists is like protecting the crack dealer lest his customers get withdrawal and a brief depression when they're put out of business.

 

Patriotism does not support the unbridled exploitation & self-serving destruction of innocent lives. It is treason, not free market capitalism. Populist capitalism accepts 7% growth and fairness. No casualties required.

[Guest Mrcruz1964]

Bush spent like a drunken sailor. Obama thinks he's Robin Hood.

Obama will see how pissed off the American people really are when he looses all his buddies in the November elections.

[Guest American Cititzen]

How about this?

 

Where in gods green earth IS FANNIE MAE and FREDDIE MAC in all of this?

 

It's the Evil banks, but Fannie and Freddie get a free ride in all of this.

 

Senate Banking Committee Chairman Chris Dodd (D-Conn.) told CNBC that the two mortgage giants will not be included in this round of “reform” but will be handled at some later date -- yet to be determined.

[Guest jxknowles]

If you do the research yourself, you'll find Republican Phil Gramm's Gramm-Leach-Bliley Act which repealed the 1933 Glass-Steagall Act is widely credited as the single biggest factor in the finacial crisis of 2008-2009. Yes, Democrats and Republicans passed the bill 92-8 with only a handful of Dems vtoing against. President Clinton manned up and admitted his role. It seems that the lies are unidirectional these days coming from the GOP right.

[Guest LAW]

This will bring you up to speed.

 

Gramm's wife, Wendy Gramm was a member of Enron's audit committee, and also served on the company's of the Board of Directors. Phil Gramm was the second-largest recipient in the Senate of financial contributions from Enron, receiving $97,350 from the company between 1989 and 2001. Gramm legislated the surrender of the commission's authority over regulating Enron's energy futures contracts. Five weeks later, after leaving the commission, Gramm was working for Enron.

 

When George W. Bush was running for President, he made use of the Enron corporate jet fourteen times. Enron and its employees have contributed at least $736,800 to President Bush's political career--more than any other corporation. This year Congress made an attempt to reverse the Enron Loophole, but it was vetoed by President Bush in 2008.

 

Sen. Kay Bailey Hutchinson, R-Texas, who received $99,50.

 

Enron stockholders included Defense Secretary Donald H. Rumsfeld, senior Bush adviser Karl Rove, deputy EPA administrator Linda Fisher, Treasury Undersecretary Peter Fisher and U.S. Trade Rep. Robert Zoellick.

 

McCain acknowledged getting $9,500 in Enron contributions in two Senate campaigns.

 

Listen to the NPR story, "Our Confusing Economy, Explained"

http://www.npr.org/templates/story/story.p...toryId=89338743

[Guest NPR]

Toxic assets — home mortgages packaged into complicated bonds that no one wanted to touch when the housing bubble collapsed — are starting to trade again. Planet Money wanted to figure out how this chapter of financial history will end. So we decided to buy a toxic asset of our own.

[Guest LAW]

Statement of Senator Tom Coburn

Wall Street and the Financial Crisis: The Role of Credit Rating Agencies

April 23, 2010

 

In the eighteen months since the U.S. economy collapsed, many have asked whether anything could have been done differently. Nowhere is there a clearer “yes” to that question than in the example of the credit rating agencies.

 

While they were paid to forecast creditworthiness, the rating agencies proved they were not up to the task.

 

They failed to see the coming subprime mortgage meltdown, and kept AAA ratings on what should have been junk. This provided a false sense that the economy was stronger than it really was.

 

It is not an exaggeration to say that the errors of the credit rating agencies prolonged the housing bubble, and quite possibly delayed the economic correction.

 

Unfortunately, their mistakes have cost many Americans dearly. To understand what happened we have to go back to the events leading up to July 2007.

 

In July 2007, Moody’s, Standard and Poor’s and Fitch all at once massively downgraded subprime

residential mortgage backed securities or put them on notice for downgrade. Moody’s downgraded 399 subprime securities, while S&P and Fitch put out warnings on hundreds more.

 

In what was to that point the biggest downgrade event in history, the rating agencies rocked the financial industry that had heavily invested in housing.

 

Investments in subprime mortgages that were once given AAA ratings were revealed to be worthless.

 

Investors and banks worldwide that had amassed mortgage-backed securities, collateralized debt

obligations and more were suddenly all looking to sell at once. Only there were no buyers.

 

For the rating agencies it was also a devastating blow to their credibility, and for good reason. Never before had they gotten it so wrong.

 

But, what if they had made the right call? What if they accurately forecasted the housing crisis?

[Guest LAW]

Moody’s and S&P could have downgraded a significant number of residential mortgage backed securities in late 2006, rather than in mid-2007. E-mail evidence clearly shows that employees in these companies were growing increasingly uncomfortable with the ratings as they watched subprime loans deteriorate.

 

In February 2007, one S&P analyst projected that “the ratings are not going to hold through 2007.” Instead of downgrading RMBS at that point, the firm waited more than four months.

 

In the meantime, during that four month period S&P rated more than 900 securities based on mortgage loans and gave each of them an “investment grade” rating. In every case, the securities rated in that time period would be downgraded to “junk,” showing that the original ratings were far off base.

 

One of those securities was ABACUS 2007-AC1, the synthetic CDO at the heart of a current SEC fraud complaint. It was one of the worst performing CDOs in the market.

 

Had S&P or Moody’s acted faster, none of these securities would likely have been rated so highly to begin with—and many investors could have been spared enormous losses. After all, synthetic CDOs like ABACUS 2007-AC1 were built on top of highly rated, but ultimately shaky, RMBS structures.

 

Instead, the downgrades were delayed until the rating agencies could not wait any longer. And as soon as S&P made the first move, a torrent of downgrades followed from the others.

 

Yet, as with so many of the problems in the financial industry, trouble in the credit rating industry traces its roots to a misguided federal “reform.”

 

By designating three rating agencies as National Recognized Statistical Rating Organizations—or NRSROs—the SEC unwittingly sowed the seeds of our problems today.

[Guest greenzen]

The mortgage market may soon face a future without a taxpayer safety net.

[Guest August]

Political power is derived from monetary power.

 

http://www.pbs.org/moyers/journal/04162010/watch.html

 

The original Tea Party, remember, wasn't directed just against the British redcoats. Colonial patriots also took aim at the East India Company. That was the joint-stock enterprise originally chartered by the first Queen Elizabeth. Over the years, the government granted them special rights and privileges, which the owners turned into a monopoly over trade, including tea.

 

It may seem a stretch from tea to credit default swaps, but the principle is the same: when enormous private wealth goes unchecked, regular folks get hurt - badly. That's what happened in 2008 when the monied interests led us up the garden path to the great collapse.

 

Suppose the Tea Party folk had dropped by those Senate hearings this week looking into the failure of Washington Mutual. That's the bank that went belly up during the meltdown in September 2008. It was the largest such failure in American history.

 

WaMu, as we were reminded this week, made sub-prime loans that its executives knew were rotten, then packaged them as mortgage securities, and pawned them off on unsuspecting investors.