'60 Minutes' scoops M$M. Reports that Credit Default Swaps legalized by Commod Futures Modernization

[JohnWxy]

Act. BUT they did NOT mention that the Commodities Futures Modernization Act (CFMA) was attached as a rider to the 11,000 page Omnibus Spending Bill 2000 by Phil Gramm ("America has turned into a nation of whiners." - John McCain's pick for Secretary of the Treasury) and that virtually nobody in Congress knew the CFMA was in there!

The CFMA had been brought up for a vote by Gramm twice before but it went down to defeat because representatives from the Federal Reserve and the Commodities Futures Trading Commission told members of Congress that the bill wouldlead to unregulated trading and market manipulation. So Gramm had to slip it in as rider to the Omnibus Spending bill to sneak it through.

60 Minutes Report: The Bet That Blew Up Wall Street Steve Kroft On Credit Default Swaps And Their Central Role In The Unfolding Economic Crisis

The report points out that these Credit Default Swaps could be purchased by entities which didn't even own the securities the CDSs insured against default. In other in this case it was nothing more than gambling.


-----------------------------------------------------------------------------------------------------------------------------
"But the rocket fuel was the trillions of dollars in side bets on those mortgage securities, called "credit default swaps." They were essentially private insurance contracts that paid off if the investment went bad, but you didn't have to actually own the investment to collect on the insurance.

"If I thought certain mortgage securities were gonna fail, I could go out and buy insurance on them without actually owning them?" Kroft asks Eric Dinallo, the insurance superintendent for the state of New York.

"Yeah," Dinallo says. "The irony is, though, you're not really buying insurance at that point. You're just placing the bet."

Dinallo says credit default swaps were totally unregulated and that the big banks and investment houses that sold them didn't have to set aside any money to cover their potential losses and pay off their bets. "

-----------------------------------------------------------------------------------------------------------------------------------


Everybody on M$M is talking about all the complexities of these financial derivatives and the greed on Wall Street but NOBODY IS TALKING ABOUT THE FINANCIAL SERVICES MODERNIZATION ACT AND THE CFMA BOTH SOPONSORED BY GRAMM. THESE LAWS DEREGULATED TRADING IN ENERGY FUTURES LEADING TO THE ENRON DEBACLE, COSTING CALIFORNIANS BILLIONS OF DOLLARS AND NOW THE CREDIT CATASTROPHE WHICH IS THREATENING TO THROW US INTO A DEPRESSION.

THANK YOU REPUBLICAN PARTY AND PHIL GRAMM, IN PARTICULAR, FOR DEREGULATION AND THE INEVITABLE CREDIT CATASTROPHE AND ECONOMIC DISASTER IT LEAD TO.

The Wonders of Deregulation

[Narkos]

1. Problem is that they will point to Clinton who signed, which is complete

bullshit since he was in the last days of the Presidency, and the rider was submitted hours before Christmas break without being debated. Good counterpoint to all the pubs who want to blame Clinton for damn near everything.

[roseBudd]

2. Not only that but Congress legislates, Bush was already elected,

the appropriations bill was must pass

[JohnWxy]

4. I like thos links re the cheating in '04. Anything on 2000? I read "Fooled Again" - very good book

[JohnWxy]

3. that Omnibus Spending Bill had to pass or the Government would have run out of operating funds.

It was 11,000 pages long!

[Better Believe It]

5. Legislation Could Have Been Introduced To Repeal (CFMA)

Clinton never spoke or acted against it because he supported it.

And who in the Senate spoke out against CFMA before or after it was "passed"?

Didn't anyone in the Senate introduce legislation to repeal it?

And now for some factual history on deregulation instead of political spin:

--------------------------------------


Blame The Subprime Meltdown On The
Repeal Of Glass-Steagall
The Consumerist
April 17, 2008

A lot of blame has sloshed around for the sub-prime meltdown, from greedy borrowers to greedy mortgage brokers to Alan Greenspan, but if you want the real culprit, it was the repeal of the Glass-Stegall Act. On November 12, 1999, the champagne must have been shooting from the walls at Citigroup, which had worked behind the scenes for over 30 years to get the act overturned. After recovering from their hangover, they and their banking buddies went on a sub-prime lending orgy. But what was Glass-Steagall and how did it use to protect us?

Glass-Steagall was passed under the Roosevelt administration in 1933 in direct response to the Wall Street shenanigans that ushered in the Great Depression where banks shoved their own depositors into buying the stocks the banks were dealing. The basic idea was to keep banks from speculating with the savings that American citizens were entrusting within their vaults.

Now, on the one side they could sell mortgages to homeowners, and then invent fancy investment structures which they sold on Wall Street. Because they were "covered" on both ends, banks felt free to sell increasingly dicey mortgages, just so long as another sucker was picking up the garbage. This sucker was picking it up because he had a plan to repackage it and sell it to another sucker, and so on. Eventually we end up with no-doc stated income interest-only option-ARM no money down mortgages being repackaged as "sound investments" being sold as "stable assets" for city pension plans to park their money in. (See "Subprime Meltdown As Told By Stick Figures").

We can only imagine the level of machination exerted over those 30 years, but we do know this. Robert Rubin was Secretary of Treasury, which had oversight over Glass-Steagall regulation. Days before he resigned, Glass-Steagall was repealed. Just over a year later, he became chairman of the Citi executive committee, with an annual compensation of $40 million, a position he still holds, despite Citigroup's $24 billion in subprime-related losses.

Please read the entire article at:

http://consumerist.com/381032/blame-the-subprime-meltdo ...

--------------------------------------

Repeal of the Act

The bill that ultimately repealed the Act was introduced in the Senate by Phil Gramm (R-TX) and in the House of Representatives by James Leach (R-IA) in 1999. The final bill resolving the differences was passed in the Senate 90-8-1 and in the House: 362-57-15. This veto proof legislation, the Gramm-Leach-Bliley Act, was signed into law by President Bill Clinton on November 12, 1999.

The banking industry had been seeking the repeal of Glass-Steagall since at least the 1980s.

The repeal enabled commercial lenders such as Citigroup, the largest U.S. bank by assets, to underwrite and trade instruments such as mortgage-backed securities and collateralized debt obligations and establish so-called structured investment vehicles, or SIVs, that bought those securities. Citigroup played a major part in the repeal. Then called Citicorp, the company merged with Travelers Insurance company the year before using loopholes in Glass-Steagall that allowed for temporary exemptions. With lobbying led by Roger Levy, the "finance, insurance and real estate industries together are regularly the largest campaign contributors and biggest spenders on lobbying of all business sectors . They laid out more than $200 million for lobbying in 1998, according to the Center for Responsive Politics..." These industries succeeded in their two decades long effort to repeal the act.

http://en.wikipedia.org/wiki/Glass-Steagall_Act

------------------------------------------------------

Here's how the Senators voted on the final bill that President Clinton signed into law.

U.S. Senate Roll Call Votes 106th Congress - 1st Session

as compiled through Senate LIS by the Senate Bill Clerk under the direction of the Secretary of the Senate

Vote Summary

Question: On the Conference Report (S.900 Conference Report )
Vote Number: 354 Vote Date: November 4, 1999, 03:30 PM
Required For Majority: 1/2 Vote Result: Conference Report Agreed to
Measure Number: S. 900
Measure Title: An Act to enhance competition in the financial services industry by providing a prudential framework for the affiliation of banks, securities firms, and other financial service providers, and for other purposes.
Vote Counts: YEAs 90
NAYs 8
Present 1
Not Voting 1

Grouped By Vote Position

YEAs ---90
Abraham (R-MI)
Akaka (D-HI)
Allard (R-CO)
Ashcroft (R-MO)
Baucus (D-MT)
Bayh (D-IN)
Bennett (R-UT)
Biden (D-DE)
Bingaman (D-NM)
Bond (R-MO)
Breaux (D-LA)
Brownback (R-KS)
Bunning (R-KY)
Burns (R-MT)
Byrd (D-WV)
Campbell (R-CO)
Chafee, L. (R-RI)
Cleland (D-GA)
Cochran (R-MS)
Collins (R-ME)
Conrad (D-ND)
Coverdell (R-GA)
Craig (R-ID)
Crapo (R-ID)
Daschle (D-SD)
DeWine (R-OH)
Dodd (D-CT)
Domenici (R-NM)
Durbin (D-IL)
Edwards (D-NC)
Enzi (R-WY)
Feinstein (D-CA)
Frist (R-TN)
Gorton (R-WA)
Graham (D-FL)
Gramm (R-TX)
Grams (R-MN)
Grassley (R-IA)
Gregg (R-NH)
Hagel (R-NE)
Hatch (R-UT)
Helms (R-NC)
Hollings (D-SC)
Hutchinson (R-AR)
Hutchison (R-TX)
Inhofe (R-OK)
Inouye (D-HI)
Jeffords (R-VT)
Johnson (D-SD)
Kennedy (D-MA)
Kerrey (D-NE)
Kerry (D-MA)
Kohl (D-WI)
Kyl (R-AZ)
Landrieu (D-LA)
Lautenberg (D-NJ)
Leahy (D-VT)
Levin (D-MI)
Lieberman (D-CT)
Lincoln (D-AR)
Lott (R-MS)
Lugar (R-IN)
Mack (R-FL)
McConnell (R-KY)
Moynihan (D-NY)
Murkowski (R-AK)
Murray (D-WA)
Nickles (R-OK)
Reed (D-RI)
Reid (D-NV)
Robb (D-VA)
Roberts (R-KS)
Rockefeller (D-WV)
Roth (R-DE)
Santorum (R-PA)
Sarbanes (D-MD)
Schumer (D-NY)
Sessions (R-AL)
Smith (R-NH)
Smith (R-OR)
Snowe (R-ME)
Specter (R-PA)
Stevens (R-AK)
Thomas (R-WY)
Thompson (R-TN)
Thurmond (R-SC)
Torricelli (D-NJ)
Voinovich (R-OH)
Warner (R-VA)
Wyden (D-OR)

NAYs ---8
Boxer (D-CA)
Bryan (D-NV)
Dorgan (D-ND)
Feingold (D-WI)
Harkin (D-IA)
Mikulski (D-MD)
Shelby (R-AL)
Wellstone (D-MN)

Present - 1
Fitzgerald (R-IL)

Not Voting - 1
McCain (R-AZ)

http://www.senate.gov/legislative/LIS/roll_call_lists/r ...

---------------------------------------
Statements in support of bill that repealed of Glass-Steagall Act



FOR IMMEDIATE RELEASE: CONTACT: CHRISTI HARLAN
Friday, November 12, 1999 202-224-0894

GRAMM'S STATEMENT AT SIGNING CEREMONY
FOR GRAMM-LEACH-BLILEY ACT

Sen. Phil Gramm, chairman of the Senate Committee on Banking, Housing and Urban Affairs, made the following statement today in a ceremony at the Eisenhower Executive Office Building, where President Clinton signed the Gramm-Leach-Bliley Act into law:

"The world changes, and Congress and the laws have to change with it.

"Abraham Lincoln used to like to use the analogy that old and outmoded laws need to be changed because it made about as much sense to continue to impose them on people as it did to ask a man to wear the same clothes he did when he was a child.

"In the 1930s, at the trough of the Depression, when Glass-Steagall became law, it was believed that government was the answer. It was believed that stability and growth came from government overriding the functioning of free markets.

"We are here today to repeal Glass-Steagall because we have learned that government is not the answer. We have learned that freedom and competition are the answers. We have learned that we promote economic growth and we promote stability by having competition and freedom.

"I am proud to be here because this is an important bill; it is a deregulatory bill. I believe that that is the wave of the future, and I am awfully proud to have been a part of making it a reality."

-30-

-----------------------------------------

THE WHITE HOUSE

Office of the Press Secretary

For Immediate Release November 12, 1999
REMARKS BY THE PRESIDENT
AT FINANCIAL MODERNIZATION BILL SIGNING

Presidential Hall

1:37 P.M. EST

THE PRESIDENT: Thank you and good afternoon. I thank you all for coming to the formal ratification of a truly historic event -- Senator Gramm and Senator Sarbanes have actually agreed on an important issue. (Laughter.) Stay right there, John. (Laughter.) I asked Phil on the way out how bad it's going to hurt him in Texas to be walking out the door with me. (Laughter.) We decided it was all right today.

Like all those before me, I want to express my gratitude to those principally responsible for the success of this legislation. I thank Secretary Summers and the entire team at Treasury, but especially Under Secretary Gensler, for their work, and Assistant Secretary Linda Robertson. I thank you, Chairman Greenspan, for your constant advocacy of the modernization of our financial system. I thank you, Chairman Levitt, for your continuing concern for investor protections. And I thank the other regulators who are here.

I thank Senator Gramm and Senator Sarbanes, Chairman Leach and Congressman LaFalce, and all the members of Congress who are here. Senator Dodd told me the Sisyphus story, too, over and over again, but I've rolled so many rocks up so many hills, I had a hard time fully appreciating the significance of it. (Laughter.)

I do want to thank all the members here and all those who aren't here. And I'd like to thank two New Yorkers who aren't here who have been mentioned -- former Secretary of the Treasury Bob Rubin, who worked very hard on this; and former Chairman, Senator Al D'Amato, who talked to me about this often. So this is a day we can celebrate as an American day.

To try to give some meaning to the comments that the previous speakers have made about how we're making a fundamental and historic change in the way we operate our financial institutions, I think it might be worth pointing out that this morning we got some new evidence on the role of new technologies in our economy, which showed that over the past four years, productivity has increased by a truly remarkable 2.6 percent -- that's about twice the rate of productivity growth the United States experienced in the 1970s and the 1980s. In the last quarter alone, productivity grew at 4.2 percent.

This is not just some aloof statistic that matters only to the Federal Reserve, the Treasury, and Wall Street economists. It is the key to rising paychecks and greater security and opportunity for ordinary Americans. And the combination of rising productivity, more open borders and trade, working to keep down inflation, the dramatic reduction of the deficit and the accumulation of the surplus, and the continued commitment to the investment in the American people, research and development, and new productivity-inducing technologies has given us the most sustained real wage growth in more than two decades, with the lowest inflation in more than three decades.

I can tell you that back in December of 1992, when we were sitting around the table at the Governor's Mansion, trying to decide what had to be in this economic program, the economists that I had there, who are normally thought to be -- you know, you say, well, they're Democrats, they'll be more optimistic -- none of them believed that we could grow the economy for this long with an unemployment rate this low and an inflation rate this low. And it's a real tribute to the American people.

So what you see here, I think, is the most important recent example of our efforts here in Washington to maximize the possibilities of the new information age global economy, while preserving our responsibilities to protect ordinary citizens and to build one nation here. And there will always be competing interests. You heard Senator Gramm characterize this bill as a victory for freedom and free markets. And Congressman LaFalce characterized this bill as a victory for consumer protection. And both of them are right. And I have always believed that one required the other.

It is true that the Glass-Steagall law is no longer appropriate to the economy in which we lived. It worked pretty well for the industrial economy, which was highly organized, much more centralized and much more nationalized than the one in which we operate today. But the world is very different.

Now we have to figure out, well, what are still the individual and family and business equities that are still involved that need some protections. And the long, and often tortured story of this law can be seen as a very stunning specific example of the general challenge that will face lawmakers of both parties, that will face liberals and conservatives, that will face all Americans as we try to make sure that the 21st century economy really works for our country and works for the people who live in it.

So I think you should all be exceedingly proud of yourselves, including being proud of your differences and how you tried to reconcile them. Over the past seven years, we've tried to modernize the economy; and today what we're doing is modernizing the financial services industry, tearing down these antiquated walls and granting banks significant new authority.

This will, first of all, save consumers billions of dollars a year through enhanced competition. It will also protect the rights of consumers. It will guarantee that our financial system will continue to meet the needs of underserved communities -- something that the Vice President and I tried to do through the empowerment zones, the enterprise communities, the community development financial institutions, but something which has been largely done through the private sector and honoring the Community Reinvestment Act.

The legislation I signed today establishes the principles that as we expand the powers of banks, we will expand the reach of that act. In order to take advantage of the new opportunities created by the law, we must first show a satisfactory record of meeting the needs of all the communities the financial institution serves.

I want to thank Senator Sarbanes and Congressman LaFalce for their leadership on the CRA issue. I want to applaud literally hundreds of dedicated community groups all around our country that work so hard to make sure the CRA brings more hope and capital to hard-pressed areas.

The bill I signed today also does, as Congressman Leach says, take significant steps to protect the privacy of our financial transactions. It will give consumers, for the very first time, the right to know if their financial institution intends to share their financial data, and the right to stop private information from being shared with outside institutions.

Like the new medical privacy protections I announced two weeks ago, these financial privacy protections have teeth. We granted regulators full enforcement authority and created new penalties to punish abusive practices. But as others have said here, I do not believe that the privacy protections go far enough. I am pleased the act actually instructs the Treasury to study privacy practices in the financial services industry, and to recommend further legislative steps. Today, I'm directing the National Economic Council to work with Treasury and OMB to complete that study and give us a legislative proposal which the Congress can consider next year.

Without restraining the economic potential of new business arrangements, I want to make sure every family has meaningful choices about how their personal information will be shared within corporate conglomerates. We can't allow new opportunities to erode old and fundamental rights.

Despite this concern, I want to say again, this legislation is truly historic. And it indicates what can happen when Republicans and Democrats work together in a spirit of genuine cooperation -- when we understand we may not be able to agree on everything, but we can reconcile our differences once we know what the larger issue is -- how to maximize the opportunities of the American people in a global information age, and still preserve our sense of community and protection for individual rights.

In that same spirit, I hope we will soon complete work on the budget. I hope we will complete work on the Work Incentives Improvement Act, to allow disabled people to go to work -- and I know Senator Gramm has been working with Senator Roth and Senator Jeffords and Senator Moynihan and Senator Kennedy on that.

There are a lot of things we can do once we recognize we're dealing with a big issue over which we ought to have some disagreements, but where we can come together in constructive and honorable compromise to keep pushing our country into the possibilities of the future.

This is a very good day for the United States. Again, I thank all of you for making sure that we have done right by the American people and that we have increased the chances of making the next century an American century. I hope we can continue to focus on the economy and the big questions we will have to deal with revolving around that. I hope we will continue to pay down our debt. I still believe in a global economy. We will maximize the opportunities created by this law if the government is reducing its debt and its claim on available capital. So I hope very much that that will be part of our strategy in the future.

But today we prove that we could deal with the large issue facing our country and every other advanced economy in the world. If we keep dealing with it in other contexts, the future of our children will be very bright, indeed.

Thank you very much. I'd like to ask all the members of Congress to come up here while we sign the bill. Thank you. (Applause.)

President Clinton Signs Repeal

[JohnWxy]

6. from 2000 to 2006 the Senate and HOuse were controlled by the Republicans

Democrats couldn't introduce legislation unless it was cosponsored by a Republican. THese were the days when Tom Delay ran the Republican party in the Legislative area and they ran the legislature as a one party system. Democrats couldn't even get into committee meetings to introduce amendments to proposed legislation.

[Better Believe It]

7. Lots Of Legislation Was Proposed By Democrats From 2000 to 2006

Did the Democratic leadership in the Senate even sponsor a single bill to repeal that legislation?

They did not!

So have they proposed such legislation after they won congress in 2006?

They did not!

Are any Democratic Senate leaders currently sponsoring legislation to repeal that legislation?

Probably not .... because the big bad Bush and Wall Street would oppose it!

Enough lame excuses now .... that's become a bit worn and tiring.

Want to hear a new excuse for inaction over the next two years or more?

We only have 59 Democratic Senators so we can't pass anything .... the Republicans will filibuster!

So the Republicans only need 51 Senators to get their way, but the Democratic Party needs at least 60 Senators to pass progressive legislation!

Some Democratic politicians are probably hoping that 60 Democrats are not in the Senate so they can use the old "filibuster proof" Senate excuse to justify further their inaction.

[Narkos]

8. You're confusing repeal of Glass-Steagall with CMFA of 2000

Glass Steagall had very little to do with the subprime mortgage crisis, contrary to recent claims. The CMFA was passed a year later in 2000 in the waning days of the Clinton presidency, without being debated in the house or Senate. It was the CMFA that banned regulation of the derivatives industry, not GBL. The CMFA was a 262 addendum tacked onto a 11000 page spending. And people DID SPEAK OUT against it. Paul Wellstone was one of them:
http://journals.democraticunderground.com/Waiting%20For...

So, explain to me why you want to make this into a bipartisan issue?

[Better Believe It]

10. The Deregulation Was A bi-partisan affair.

Only one senator ever made the record against CMFA, Wellstone, and absolutely no effort has been made in Congress in the past 8 years to repeal CMFA. In fact, I don't believe any legislation proposing to repeal CMFA has been sponsored by anyone in the Senate to this date!

And you surely know that only 8 Senators voted against the repeal of Glass-Steagall.

Now if that's not a bi-partisan deregulation record I'd like to know what is!

Facts are facts.

Excuses and lame political spin aren't a good substitute for facts.

[Narkos]

11. No it wasn't. Your facts are wrong, and you won't admit it.

You cut and pasted this huge post about Glass Steagall, which had ABSOLUTELY NOTHING to do with the CFMA. Then you blame the Democrats for doing nothing for the past 8 years, never mind that they were out of power for most of that time, and didn't have a veto proof majority for the time they were in power.

You got caught with you pants down, and it's clear that maybe you should have your facts straight next time you want use your conservative talking points.

[Better Believe It]

13. You seem to be substituting wishful thinking for documented facts.

You clearly have not read the facts on how the repeal of Glass Steagall played a major role in deregulating the banking and financial services industry.

The vote was 90-8. Only 8 voted against, 7 Democrats and 1 Republican. Are you suggesting the repeal of Glass-Steagall had nothing to do with deregulation? That of course is absolutely false. If you don't believe me, I suggest you actually read credible articles regarding that act since you seem to be totally unfamiliar with it. You might start by actually reading my post. It's always good to read a post before commenting on it.

According to you, only one Democratic Senator even spoke against the CFMA. I'll take your word on this since I haven't had time to research the matter.

Now surely you'll have to admit that the leadership of the Democratic party in the Senate has not sponsored any legislation to repeal the CFMA from the time it was adopted to October 27, 2008. Isn't that right, or are you going to deny that telling fact?

[Narkos]

14. You seem to be substituting cherry picked information for the truth

to fit your conservative/libertarian agenda. Explain to me how the repeal of Glass Steagall led to the economic meltdown in your own words. No cut and paste. Tell me exactly how. After making a fool out of yourself by confusing GBL and CFMA, I get the sense that you won't be able to. Not all deregulation is bad, and repealing Glass Steagall played no role in the current crisis.

As for why the Senate didn't sponsor legislation repealing the CFMA, why should they have? It never would have passed, and you know it. So, again, blaming the Dems for what is a REPUBLICAN mess just doesn't wash.

[Better Believe It]

15. Here's The Truth On Deregulation! You Can't Handle The Truth!

Rush to deregulate leads to disaster
by Bernard Martin
The Daily Herald
October 7, 2008

Starting with Nixon (Republican) and Ford (Republican), and then Carter (Democrat), the deregulation of the airlines, railroads and truck industries was accomplished.

Reagan followed with the natural gas and oil industries, then Bush I and Clinton followed with the energy industry. Think Enron.

Clinton continued with the telecommunications industry. Anyone have any WorldCom stock?

In the financial sector, Reagan (Republican) got the ball rolling in 1982 with the Depository Institutions Act, which allowed the savings and loan industry a free hand. This was promptly abused and led to the recession of the 1990s and $150 billion in government bailouts.

But the Republicans don't get all the glory. Clinton was able to get the Financial Services Modernization Act of 1999, which basically eliminated the restrictions of the Glass Seagall Act of 1933 and allowed banks to become financial casbahs and dabble in all the pieces of the financial pie; commercial and investment banking, and the brokerage and insurance industries.

Here we are bailing out the industries that were deregulated, were then enormously profitable for some and now through mismanagement have generated huge losses. All this while the value of our houses, our retirement portfolios, all of our assets take a beating.

Please read the entire article at:

http://www.dailyherald.com/story/?id=240691&src=

[Narkos]

18. You just don't read, do you?

I asked that YOU explain how repealing Glass Steagall led to the financial crisis. How did allowing investment and commercial banking to intermingle cause the crisis? See, here's your problem. You don't know. You actually probably don't know much of anything about this subjecgt. You cut and paste articles without really understanding them.

I read the article, and it makes the point that some deregulation was bipartisan. Not all deregulation is bad, some is actually good. You seem to miss that point. It is deregulation of the shadow banking system and the deregulation of complex financial instruments that in part led to the economic crisis. Sorry, the republicans OWN that part of the story.

If you're not going to use your own words and ideas, don't bother posting any further.

Good day to you sir.

[Better Believe It]

19. Tired Of Spinning Tall Tales And Being An Apologist For Deregulators?

Good!

[Narkos]

20. Nope. You're confused about this issue, and you need to be educated.

That's all.

Good day, sir.

[JohnWxy]

25. THE FACTS ARE THAT THE CFMA WAS BROUGHT UP FOR VOTE TWICE AND DEFEATED TWICE.

THAT'S WHY THE THE REPUBLICANS HAD TO SNEAK IT IN AS A RIDER TO THE OMNIBUS SPENDING BILL. That was the ONLY WAY THE REPUBLICANS COULD GET IT PASSED, BY SNEAKING IT THROUGH. THAT IS THE REALITY HERE.

The text of the bill is clear. It states that Credit Default Swaps were NOT COVERED BY the Commodity Exchange Act or any regulation of the Commodity Futures Trading Commission. It also pre-empts the states from enforcing any anti-gambling laws they have on their books.

http://www.democraticunderground.com/discuss/duboard.ph...

THis may not fit into the conceptual bubble you prefer to live in but it is what we who occupy the real world recognize as the facts of this issue.

Keep stamping your foot, crying and chanting your chant if you want. YOu'll only be speaking to other autistic types who also prefer to deny reality.

[JohnWxy]

24. here's how deregulation was put into place by REpublicans and specifically Phil Gramm with CFMA

http://www.motherjones.com/news/feature/2008/07/foreclo...


Eight years ago, as part of a decades-long anti-regulatory crusade, Gramm pulled a sly legislative maneuver that greased the way to the multibillion-dollar subprime meltdown. Yet has Gramm been banished from the corridors of power? Reviled as the villain who bankrupted Middle America? Hardly. Now a well-paid executive at a Swiss bank, Gramm cochairs Sen. John McCain's presidential campaign and advises the Republican candidate on economic matters. He's been mentioned as a possible Treasury secretary should McCain win. That's right: A guy who helped screw up the global financial system could end up in charge of US economic policy. Talk about a market failure.

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.
-----------------------------------------------------------------------------------------------------------------------


Without the CFMA explicitly forbidding regulation of Credit Default Swaps they never would have grown to be such a big item in the financial industry's play book. THis is what set WallStreet lose on a orgy of reckless trading in a blind pursuit of profits.


YEah, the REPUBLICANs were constantly preaching how we needed to deregulate everything and we'd achieve Nirvana. Yeah, some nirvana. Now, we have to worry about whether we're going to be able to avoid a depression.

[JohnWxy]

23. The Act that actually DEREGULATED the transactions entered into by BAnks was the CFMA.

the GBL broke down the wall between commercial banks and investment banks brokerage houses and insurance companies. But it did not get specific about trading in certain kinds of financial instruments. That's why the WAll Street people (acting through Gramm and with his wife helping (she was then head of the Commodiites Futures TRading Commission)) had to get the CFMA passed to free trading in various financial derivatives from regulation.

Now the facts, as they exist in the real world, (rather than as they seem to exist in your fantasy world) are that the CFMA was brought up twice for a vote and it was DEFEATED ... TWICE. That's why Gramm had to slip it in as rider to the Omnibus Spendiing Bill 2000.

Here, on the last two pages of the document is some important text:

What all the legal language in the excerpt from the bill below means is that Credit Default Swaps were NOT COVERED BY the Copmmodity Exchange Act or any regulation of the Commodity Futures Trading Commission. It also pre-empts the states from enforcing any anti-gambling laws they have on their books.

http://www.cftc.gov/stellent/groups/public/@lrrulesands...

SEC. 408. CONTRACT ENFORCEMENT.

(a) HYBRID INSTRUMENTS. No hybrid instrument shall be void, voidable, or unenforceable, and no party to a hybrid instrument shall be entitled to rescind, or recover any payment made with respect to, a hybrid instrument under any provision of Federal or State law, based solely on the failure of the hybrid instrument to satisfy the predominance test set forth in section 405(b) of this Act or to comply with the terms or conditions of an exemption or exclusion from any provision of the Commodity Exchange Act or any regulation of the Commodity Futures Trading Commission.

(b) COVERED SWAP AGREEMENTS. No covered swap agreement shall be void, voidable, or unenforceable, and no party to a covered swap agreement shall be entitled to rescind, or recover any payment made with respect to, a covered swap agreement under any provision of Federal or State law, based solely on the failure of the covered swap agreement to comply with the terms or conditions of an exemption or exclusion from any provision of the Commodity Exchange Act or any regulation of the Commodity Futures Trading Commission.

(c) PREEMPTION. This title shall supersede and preempt the application of any State or local law that prohibits or regulates gaming or the operation of bucket shops (other than antifraud provisions of general applicability) in the case of
(1) a hybrid instrument that is predominantly a banking product; or
(2) a covered swap agreement.®

THe Hybrid INstrument referred to in the excerpt is defined in the act as a:
"COVERED SWAP AGREEMENT. In this title, the term ``covered swap agreement'' means an identified banking product ... including a credit or equity swap, based on a commodity other than an agricultural commodity enumerated in section 1a(4) of the Commodity Exchange Act"



The CFMA is the bill that: "Excludes specified banking products and swap agreements from Commodity Futures Exchange Commission coverage." - from the Library of Congress, Thomas record

THIS IS THE SIMPLE REALITY OF THE CFMA.

YOU MAY CONTINUE TO HAVE A TANTRUM AND KEEP SCREAMING THAT REALITY IS OTHERWISE BUT IT WON'T CHANGE THIS SIMPLE TRUTH.

[JohnWxy]

12. Deregulation was NOT a bipartisan affair. It was the baby of the Republicans.

I am happy to repeat the actual facts as they are - as I have posted above - the CFMA is what really unleashed what had been, by statute, illegal gambling. From the 60 minutes report on the CFMA (to enable making trading in credit derivatives legal) - ( "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.". The bill included language on page 262 that prevents the states from enforcing existing gambling and 'bucket-shop' laws against Wall Street.


It was attached as a rider to the Omnibus Funding bill 2000 a must pass bill.

This was not bi-partisan as Gramm had tried twice before to get this bill passed and it failed. That's why he added it to the Omnibus Funding Bill as a rider - to slip it through.

From 2000 to 2006 the Democrats could not do much of anything in terms of legislation without Republican approval. This is how they were running the legislature (the Republicans even threatened one of their own (a representative from Minnesota, I believe - I don't remember his name, that if he didn't back a certain bill the party wanted they would run somebody against him for his seat, in the coming election and make sure he was replaced!). Democrats were lucky to get into committee meetings where the legislation was created, to offer amendments.

Again, in 1999, Credit Default Swaps were very new. As the Newsweek article I provided a link to says they were created in 1994 by JP Morgan people. They hadn't really grown in use all that much and few people knew much about them (hell, few at JP MOrgan understood them and obviously few on Wallstreet still understand them - that's why the Government (i.e. us taxpayers) had to step in and bail them out to the tune of $700 Billion.)

Speaking of what Democrats could do now - Bush has used his veto 7 times - 6 of them since the Democrats took over the Congress in January 2006 Fox news- "Bush Vetoes Children's Health Insurance Bill for Second Time" (got a problem with Fox news???).

The Republicans were the ones committed to Deregulation, acting like it would solve all our problems.

I realize Republicans like to keep repeating their propaganda over and over again even when it's composed of complete lies. The technique is well known, it's called the "Big Lie". Repeat something over and over again and eventually people will think it must be true. That's what you count on. It was well practiced by Hitler and Goebbles and you Republicans put a lot of faith in it too. But I am not one to give in to lies even if chanted endlesssly by screaming zealots.

[JohnWxy]

9. the Gramm-Leach-Bliley Act, 1999 repealed the Glass-Steagal act

but he CFMA (2000) was what enabled Credit Default Swaps to be traded without any regulation or controls. The trading in CDSs really 'took off' after passage of the CFMA. True the Gramm-Leach-Biley act broke down the separation between commercial banking and investment banking and brokerage business. In 1999 I don't think anybody understood Credit Default Swaps and many didn't even know what they were. They were invented in 1994 by JP Morgan people.

http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act
"The Glass-Steagall Act prohibited a bank from offering investment, commercial banking, and insurance services." ..."The Gramm-Leach-Bliley Act (GLBA) allowed commercial and investment banks to consolidate."

Many of the largest banks, brokerages, and insurance companies desired the Act at the time. The justification was that individuals usually put more money into investments when the economy is doing well, but they put most of their money into savings accounts when the economy turns bad. With the new Act, they would be able to do both 'savings' and 'investment' at the same financial institution, which would be able to do well in both good and bad economic times.

Prior to the Act, most financial services companies were already offering both saving and investment opportunities to their customers. On the retail/consumer side, a bank called Norwest which would later merge with Wells Fargo Bank led the charge in offering all types of financial services products in 1986. American Express attempted to own almost every field of financial business (although there was little synergy among them). Things culminated in 1998 when Travelers, a financial services company with everything but a retail/commercial bank, bought out Citibank, creating the largest and the most profitable company in the world. The move was technically illegal and provided impetus for the passage of the Gramm-Leach-Bliley Act.

Also prior to the passage of the Act, there were many relaxations to the Glass-Steagall Act. For example, a few years earlier, commercial Banks were allowed to get into investment banking, and before that banks were also allowed to get into stock and insurance brokerage. Insurance underwriting was the only main operation they weren't allowed to do, something rarely done by banks even after the passage of the Act.

Much consolidation occurred in the financial services industry since, but not at the scale some had expected. Retail banks, for example, do not tend to buy insurance underwriters, as they seek to engage in a more profitable business of insurance brokerage by selling products of other insurance companies. Other retail banks were slow to market investments and insurance products and package those products in a convincing way. Brokerage companies had a hard time getting into banking, because they do not have a large branch and backshop footprint. Banks have recently tended to buy other banks, such as the 2004 Bank of America and Fleet Boston merger, yet they have had less success integrating with investment and insurance companies. Many banks have expanded into investment banking, but have found it hard to package it with their banking services, without resorting to questionable tie-ins which caused scandals at Smith Barney.


Remaining restrictions
Crucial to the passing of this Act was an amendment made to the GLBA, stating that no merger may go ahead if any of the financial holding institutions, or affiliates thereof, received a "less than satisfactory rating at its most recent CRA exam", essentially meaning that any merger may only go ahead with the strict approval of the regulatory bodies responsible for the Community Reinvestment Act (CRA).<10>. This was an issue of hot contention, and the Clinton Administration stressed that it "would veto any legislation that would scale back minority-lending requirements." <11>

The GLBA also did not remove the restrictions on banks placed by the Bank Holding Company Act of 1956 which prevented financial institutions from owning non-financial corporations. It conversely prohibits corporations outside of the banking or finance industry from entering retail and/or commercial banking. Many assume Wal-Mart's desire to convert its industrial bank to a commercial/retail bank ultimately drove the banking industry to back the GLBA restrictions.

Some restrictions remain to provide some amount of separation between the investment and commercial banking operations of a company. For example, licensed bankers must have separate business cards, e.g., "Personal Banker, Wells Fargo Bank" and "Investment Consultant, Wells Fargo Private Client Services". Much of the debate about financial privacy is specifically centered around allowing or preventing the banking, brokerage, and insurances divisions of a company from working together.

In terms of compliance, the key rules under the Act include The Financial Privacy Rule which governs the collection and disclosure of customers’ personal financial information by financial institutions. It also applies to companies, regardless of whether they are financial institutions, who receive such information. The Safeguards Rule requires all financial institutions to design, implement and maintain safeguards to protect customer information. The Safeguards Rule applies not only to financial institutions that collect information from their own customers, but also to financial institutions – such as credit reporting agencies – that receive customer information from other financial institutions.

Your right, Clinton was "gung ho" on modernizing laws re some business practices. He was a bit naive about some of these things. But, as I said, in 1999 I think very few knew much about Credit Default Swaps. And it was the CFMA that enabled the unregualated trading in these instruments.

[Robert Oak]

16. Robert Rubins

wanted it, you are right and great post by the way. Make a nice blog post, the history of derivatives.

On 60 minutes, they did a piece in 1995 on dervatives and how people were losing everything on them.

http://www.economicpopulist.org/?q=content/60-minutes-r...

[upi402]

17. General Discussion needs to see this, I think. n/t

[JohnWxy]

21. done, but you know it doesn't stay on pg 1 very long over there.

[Laelth]

22. Excellent report & analysis. Thanks for posting. n/t

The United States is a LIBERAL Country.



-Laelth