from OurFuture.org:
Why Wall Street Is BurningSubmitted by Al Meyerhoff
What do you get for $700 billion? Especially since this could be the biggest pig in the history of pokes. Well, for starters, one hopes we at least get back the fundamental New Deal marketplace protections that served us well since the Great depression – before they were systematically undermined by the deregulation wrecking crew.
This deregulation assault started with the Republican “Contract with America in 1994. Over a presidential veto, Congress passed the Private Securities Law Reform Act rolling back landmark 1933 and 1934 national securities laws. The PSLRA made it harder for shareholders to recover from fraud, opening the door to Enron and its ilk. They walked right through. Also during the 1990’s, Clinton Administration Treasury Secretary and “wunderkind” Robert Rubin (eventually Chairman of now troubled Citibank) led a bipartisan effort to repeal another Depression Era law, Glass–Steagall, prohibiting the same firms from being both a commercial and investment bank. The Act initially was passed to prevent a repeat of 1920’s scams where banks created speculative instruments that allowed mortgage debts to be turned into securities then sold to unsuspecting investors with little scrutiny of the actual loan. Sound familiar?
For a while, banks then minted money, including by doling out the some $1 trillion in mortgages still outstanding. Some are now on the verge of default. How many? How much? No one knows. But of three million sub prime and adjustable loans, roughly 18% are past due. Rubin opined recently that such “excesses leading to disruptions are just how our markets work.” His excesses, our disruptions.
Last year, the Supreme Court got into this deregulation game. In a case called Stoneridge, a five justice majority narrowly re-interpreted those same New Deal securities laws, concluding that “third parties” (think investment banks) that developed illegal schemes allowing others (think Enron) to lie may not be liable to victimized shareholders. Otherwise, said the Court, “overseas firms . . .could be deterred from doing business here.” Like they are lining up now. Stoneridge was heavily politicized, with Treasury Secretary Paulson personally lobbying President Bush to support Wall Street – and to prohibit the filing of SEC an amicus brief on behalf of shareholders. Through a series of Stoneridge-like decisions, the High court has invited this atmosphere of the robber barrons and excess during our very own gilded age.
Sounding more like Herbert Hoover every day, President Bush’s answer to all of this is to plead for calm. Former Fed Chairman Alan Greenspan is less sanguine: “this is a once in half a lifetime – probably once in a lifetime type of event; it outstrips anything I’ve seen and it is still not resolved. Indeed it will continue to be a corrosive force until the price of homes stabilizes.” Former AIG head Hank Greenberg suggested this week that we have gone from “greed to fear.” One invites the other. ......(more)
The complete piece is at:
http://www.ourfuture.org/progressive-opinion/2008093926/why-wall-street-burning