Mon Sep 10, 2012, 09:00 AM
marmar (68,210 posts)
Robert Scheer: The Great Deregulator
The Great Deregulator
Posted on Sep 10, 2012
By Robert Scheer
Bill Clinton bears as much responsibility as any politician for the worst economic crisis since the Great Depression, and the wild applause for his disingenuous speech at the Democratic National Convention last week is a sure sign of the poverty of what passes for progressive politics.
Do those convention delegates, and the fawning media that were wowed by the former president’s rhetorical seductions, not recall that just before he left office Clinton signed off on the game-changing legislation that ended the sensible rules imposed on Wall Street during the Great Depression? It was Clinton who cooperated with the Republicans in reversing the legacy of FDR’s New Deal, opening the floodgates of unfettered avarice that almost drowned the world’s economy during the reign of George W. Bush.
How convenient to ignore the Financial Services Modernization Act, which Clinton signed into law to summarily end the Glass-Steagall barrier against the commingling of investment and commercial banking. Do the Democrats not remember that Citigroup, the first too-big-to-fail bank made legal by the law Clinton signed, became the $15 million employer of Robert Rubin, the Clinton treasury secretary who led the fight for the law that legalized the creation of Citigroup? Or that Citigroup—led by Sanford Weill, to whom Clinton gave one of the souvenir pens he used to approve that onerous legislation—went on to be a major player in the subprime mortgage swindles and had to be bailed out with more than $50 billion of taxpayer funds?
Those scams were based on bundling suspect mortgages into collateralized debt obligations (CDOs), backed by the phony insurance of credit default swaps (CDSs), all of which were given “legal certainty,” to quote Lawrence Summers, who replaced Rubin as Clinton’s treasury secretary. It was Summers who encouraged Clinton to sign the Commodity Futures Modernization Act, which declared CDOs and CDSs immune to any existing regulatory law and the purview of any regulatory agency. ................(more)
The complete piece is at: http://www.truthdig.com/report/item/the_great_deregulator_20120910/?ln
17 replies, 3174 views
Robert Scheer: The Great Deregulator (Original post)
|Angry Dragon||Sep 2012||#8|
|Bill USA||Sep 2012||#16|
Response to antigop (Reply #4)
Mon Sep 10, 2012, 04:25 PM
just1voice (1,362 posts)
5. A few around here would care if they knew the article also rips (R)s to pieces
because the article is telling the truth, after all. Sadly, truth has to be wrapped in a pretty little propaganda package to get most people to look at it. In this election season, I think about 90% of the people around here are blind political loyalists and PR hacks, both of whom have no interest in any kind of truth.
Response to marmar (Original post)
Mon Sep 10, 2012, 08:30 PM
roseBudd (8,678 posts)
9. Gramm - Leach-Bliley own the blame
Congress legislates, POTUS is CiC, a bully pulpit and a veto pen, that only works up to a veto proof majority.
I believe in personal responsibility, and GS did not fall until Newt's bunch got in.
Response to marmar (Original post)
Tue Sep 11, 2012, 08:14 PM
Bill USA (4,100 posts)
16. The Financial Services Modernization Act was neither necessary nor sufficient to cause the
Wall Street Meltdown. If it had been then Phil Gramm would not have had to slip the Commodities Futures Modernization Act in as a rider to the 'must pass' Omnibus Spending bill 2000. They needed the CFMA to enable trading in Financial Derivatives completely UNREGULATED. The CFMA was written by Wall Street Lobbyists and Lawyers and also included the wonderful 'ENRON' loophole which enabled ENRON to trade energy futures by electronic means and eventually rip off California residents to the tune of Billions of dollars in artificually high electricity prices.
Nobody in Congress even knew the 262 page rider was in the Omnibus spending bill which had to be passed to fund the Government in the next year. The bill had been in a few committees for a year and couldn't get voted out of any of them because democrats were very suspicious of it. That's when Gramm got his big idea..slip it in as rider to the must pass Omnibus Spending bill 2000.
(all emphases my own)
see: Who Wrecked the Economy: Phil Gramm
Gramm's long been a handmaiden to Big Finance. In the 1990s, as chairman of the Senate banking committee, he routinely turned down Securities and Exchange Commission chairman Arthur Levitt's requests for more money to police Wall Street; during this period, the sec's workload shot up 80 percent, but its staff grew only 20 percent. Gramm also opposed an sec rule that would have prohibited accounting firms from getting too close to the companies they audited—at one point, according to Levitt's memoir, he warned the sec chairman that if the commission adopted the rule, its funding would be cut. And in 1999, Gramm pushed through a historic banking deregulation bill that decimated Depression-era firewalls between commercial banks, investment banks, insurance companies, and securities firms—setting off a wave of merger mania.
But Gramm's most cunning coup on behalf of his friends in the financial services industry—friends who gave him millions over his 24-year congressional career—came on December 15, 2000. It was an especially tense time in Washington. Only two days earlier, the Supreme Court had issued its decision on Bush v. Gore. President Bill Clinton and the Republican-controlled Congress were locked in a budget showdown. It was the perfect moment for a wily senator to game the system. As Congress and the White House were hurriedly hammering out a $384-billion omnibus spending bill, Gramm slipped in a 262-page measure called the Commodity Futures Modernization Act. Written with the help of financial industry lobbyists and cosponsored by Senator Richard Lugar (R-Ind.), the chairman of the agriculture committee, the measure had been considered dead—even by Gramm. Few lawmakers had either the opportunity or inclination to read the version of the bill Gramm inserted. "Nobody in either chamber had any knowledge of what was going on or what was in it," says a congressional aide familiar with the bill's history.
also see the Bet that Blew Up Wall street
(all emphases my own)
In the early part of the 20th century, the streets of New York and other large cities were lined with gaming establishments called "bucket shops," where people could place wagers on whether the price of stocks would go up or down without actually buying them. This unfettered speculation contributed to the panic and stock market crash of 1907, and state laws all over the country were enacted to ban them.
"Big headlines, huge type. This is the front page of the New York Times," Dinallo explains, holding up a headline that reads "No bucket shops for new law to hit."
"So they'd already closed up 'cause the law was coming. Here's a picture of one of them. And they were like parlors. See," Dinallo says. "Betting parlors. It was a felony. Well, it was a felony when a law came into effect because it had brought down the market in 1907. And they said, 'We're not gonna let this happen again.' And then 100 years later in 2000, we rolled them all back."
The vehicle for doing this was an obscure but critical piece of federal legislation called the Commodity Futures Modernization Act of 2000. And the bill was a big favorite of the financial industry it would eventually help destroy.
... also, note that predatory lending was an important part of the Trickle Down Deregulation disaster. They had been making questionable loans for years, but once the CFMA was passed and Banks began tradiing in Credit Default Swaps the demand for higher return loans (i.e. Subprime loans exploded). Banks were able to sell higher rate (and riskier) Collaterized Debt Obligations (composed of subprime loans) to institutional investors because they also sold them Credit Default Swaps with the CDOs and told the investors the CDSs would protect them from loss of their prinicipal in case of a default. (this of course was bullshit, but who cares??)
When 50 States Attorneys General tried to rein in Predatory lenders in 2004, the Bush administration went to court to stop them! the used an old obscure law to stop the states attorneys general from protecting consumers from predatory lenders. I they had not stopped them and predatory lenders had been reined in then the supply of high-rate (subprime) mortgages would not have been there for Wall Street Banksters to sell to suckers. (note: even more incredible Wall street bankers also bet on these CDOs and thought by holdiing CDSs sold to them by AIG that THEY were protected from loss of principal too!
..see: Predatory Lenders Partner in Crime - Eliot Spitzer
(emphases my own)
Even though predatory lending was becoming a national problem, the Bush administration looked the other way and did nothing to protect American homeowners. In fact, the government chose instead to align itself with the banks that were victimizing consumers.
Predatory lending was widely understood to present a looming national crisis. This threat was so clear that as New York attorney general, I joined with colleagues in the other 49 states in attempting to fill the void left by the federal government. Individually, and together, state attorneys general of both parties brought litigation or entered into settlements with many subprime lenders that were engaged in predatory lending practices. Several state legislatures, including New York's, enacted laws aimed at curbing such practices.
What did the Bush administration do in response? Did it reverse course and decide to take action to halt this burgeoning scourge? As Americans are now painfully aware, with hundreds of thousands of homeowners facing foreclosure and our markets reeling, the answer is a resounding no.
Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye.
The conservatives are always trying to shift blame from themselves whenever their half baked ideas creates a disaster. They like to say Clinton was responsible for everything that went wrong since the flood. Clinton did support the law allowing banks, insurance companies and brokerage houses to combine. IT was ridiculous. Most Democrats were totally opposed that law. But Clinton was under the spell of Larry Summers and others. Clinton assumed, naturally, there would be proper monitoring and regulation of banks activities. This was profoundly naive. It's not a 'bulletin' to point out that while Clinton is brilliant academically, when it comes to 'street smarts' the guy is a babe in the woods.
What most people don't remember is that back in the 90's Japanese banks were combining and becoming the biggest banks in the world. There were those who were afraid we would lose the international trade - trade (the handling of international transactions and currency conversions, and other financial services to businesses) to Japan's larger banks who could gain an economy to scale our smaller banks could not. Also at that time, London was gaining as a financial center and was allowing its banks to handle types of transactions than our banks were not allowed to. Again, there was fear that London banks would take business away from our New York banks. The feeling was, we're getting our clocks cleaned in international trade - let's not let foreign banks take away the financial transactions business (generated by this international trade) too. It was in this backdrop that Clinton's thinking has to be judged. And as pointed out above the law that really did the damage was the Commodities Futures Modernization Act - which nobody even knew was in the Omnibus Spending Bill (and even if they did it was must-pass, veto proof legislation - this must have set ol' Phil Gramm cackling ).
Response to Bill USA (Reply #16)
Wed Sep 12, 2012, 08:48 AM
groovedaddy (6,170 posts)
17. You make some very good points. A Clinton story I was told some years ago
went like this: When Bill Clinton was first elected governor of Arkansas, he was a progressive idealist. The fact he was not re-elected was directly related to his ideals running up against business interests. Between terms, he let said business interests (i.e. Tyson Chicken) know that he would adjust his ideals in a way that wouldn't threaten their interests. Bill Clinton then got elected to a second term as governor. The Financial Services Modernization Act, taken out context of the Clinton administration, might not seem like much (yes, it was bad), but there are the other bills that Clinton said that had "business friendly" written all over them, i.e. NAFTA, GATT & Media deregulation, to name a few.
We have now evolved to the point where the "legitimate" candidates for the White House MUST BE business friendly (Obama is no exception). This is primarily the reason that we, as a nation, have veered so far to the right. If big business' support of Romney is any indication, they won't be satisfied until we have out and out fascism.