Wall Street's Best Investment - Paying for Policy in Washington

[Octafish]

Will Rogers didn't think the whole thing cold be bought when he noted that America has the best Congress money can buy...

Paying for Policy in Washington

Wall Street's Best Investment

By ROBERT WEISSMAN
CounterPunch
May 5, 2009

Financial deregulatory mania over the last three decades led directly to the current financial meltdown.

Were the deregulators acting out of principle? Perhaps.

But it couldn't have hurt that the financial sector invested a staggering $5.1 billion in political influence purchasing in the United States over the last decade.

The money flows are laid out in gruesome detail in "Sold Out: How Wall Street and Washington Betrayed America," a report that my colleague Jim Donahue and I wrote, along with a team of contributors from the Consumer Education Foundation and my organization, Essential Information.

The entire financial sector (finance, insurance, real estate) drowned political candidates in campaign contributions, spending more than $1.7 billion in federal elections from 1998-2008. Primarily reflecting the balance of power over the decade, about 55 percent went to Republicans and 45 percent to Democrats. Democrats took just more than half of the financial sector's 2008 election cycle contributions.

CONTINUED...

http://www.counterpunch.org/weissman03052009.html

...Courts and Executive branch, too.

David Crosby wrote a song that asked, "What are their names? And on what streets do they live?"

Mr. Crosby added he wanted to "Ride right over and give them a piece of my mind about peace for mankind."

Oh yeah.

[leftchick]

1. that is a gruesome report

to put it mildly.


<snip>

"The report details, step-by-step, how Washington systematically sold out to Wall Street," says Harvey Rosenfield, president of the Consumer Education Foundation, a California-based non-profit organization. "Depression-era programs that would have prevented the financial meltdown that began last year were dismantled, and the warnings of those who foresaw disaster were drowned in an ocean of political money. Americans were betrayed, and we are paying a high price -- trillions of dollars -- for that betrayal."

"Congress and the Executive Branch," says Robert Weissman of Essential Information and the lead author of the report, "responded to the legal bribes from the financial sector, rolling back common-sense standards, barring honest regulators from issuing rules to address emerging problems and trashing enforcement efforts. The progressive erosion of regulatory restraining walls led to a flood of bad loans, and a tsunami of bad bets based on those bad loans. Now, there is wreckage across the financial landscape."

12 Key Policy Decisions Led to Cataclysm

Financial deregulation led directly to the current economic meltdown. For the last three decades, government regulators, Congress and the executive branch, on a bipartisan basis, steadily eroded the regulatory system that restrained the financial sector from acting on its own worst tendencies. "Sold Out" details a dozen key steps to financial meltdown, revealing how industry pressure led to these deregulatory moves and their consequences:

1. 1. In 1999, Congress repealed the Glass-Steagall Act, which had prohibited the merger of commercial banking and investment banking.
2. Regulatory rules permitted off-balance sheet accounting -- tricks that enabled banks to hide their liabilities.
3. The Clinton administration blocked the Commodity Futures Trading Commission from regulating financial derivatives -- which became the basis for massive speculation.
4. Congress in 2000 prohibited regulation of financial derivatives when it passed the Commodity Futures Modernization Act.
5. The Securities and Exchange Commission in 2004 adopted a voluntary regulation scheme for investment banks that enabled them to incur much higher levels of debt.
6. Rules adopted by global regulators at the behest of the financial industry would enable commercial banks to determine their own capital reserve requirements, based on their internal "risk-assessment models."
7. Federal regulators refused to block widespread predatory lending practices earlier in this decade, failing to either issue appropriate regulations or even enforce existing ones.
8. Federal bank regulators claimed the power to supersede state consumer protection laws that could have diminished predatory lending and other abusive practices.
9. Federal rules prevent victims of abusive loans from suing firms that bought their loans from the banks that issued the original loan.
10. Fannie Mae and Freddie Mac expanded beyond their traditional scope of business and entered the subprime market, ultimately costing taxpayers hundreds of billions of dollars.
11. The abandonment of antitrust and related regulatory principles enabled the creation of too-big-to-fail megabanks, which engaged in much riskier practices than smaller banks.
12. Beset by conflicts of interest, private credit rating companies incorrectly assessed the quality of mortgage-backed securities; a 2006 law handcuffed the SEC from properly regulating the firms.

[Octafish]

4. ''Financial deregulation led directly to the current economic meltdown...''

Gruesome, indeed, my Friend.

A lookout from the Executive Summary:

Wall Street is presently humbled, but not
prostrate. Despite siphoning trillions of
dollars from the public purse, Wall Street
executives continue to warn about the perils
of restricting “financial innovation” — even
though it was these very innovations that led
to the crisis. And they are scheming to use
the coming Congressional focus on financial
regulation to centralize authority with industry-
friendly agencies.

Guess who led the charge, way back when Ronnie and Mommie played hide the pickle in the Oval Office?



Know your BFEE: Goldmine Sacked or The Best Way to Rob a Bank Is to Own One

[leftchick]

5. No One can rob the taxpayers more efficiently than the BEE

That has been their lifelong ambition. Getting filthy Rich off the US taxpayer. All the way back to Prescott. The Robber Barons that never go away.

[Octafish]

9. Futurist Jacque Fresco spoke in Ann Arbor yesterday...

...91 years young, the guy sounded like a regular on DU.

He said war is a racket. We need to move the economy beyond money and priviledge. He indicated if we are to survive, we must use the planet's resources to make life better for everybody. There is more than enough to make things so everyone has food, water, shelter, education. As for work, robots can do the repetitive mindless labor no one likes. People can be freed to do the thinking and good work.

Regarding Prescott, it goes back to his daddy and granddaddy. They made money off World War I and the Civil War, dis-respectfully.

Know your BFEE: Merchants of Death

[leftchick]

11. The Civil War?

I knew about ghwb's grandpoopy (forgot his name) and WWI but the freakin Civil war? Who was that? The outrages just never end.

[malaise]

2. Thanks

I've been looking for the full report

[Octafish]

6. ''Sold Out'' is an amazing document.

It spells out how the U.S. Government was bought.

The industry spent even more — topping
$3.4 billion — on officially registered
lobbying of federal officials during the same
period.

During the period 1998-2008:

• Accounting firms spent $81 million
on campaign contributions and $122
million on lobbying;

• Commercial banks spent more than
$155 million on campaign contributions,
while investing nearly $383
million in officially registered lobbying;

• Insurance companies donated more
than $220 million and spent more
than $1.1 billion on lobbying;

• Securities firms invested nearly
$513 million in campaign contributions,
and an additional $600 million
in lobbying.

All this money went to hire legions of
lobbyists. The financial sector employed
2,996 lobbyists in 2007. Financial firms
employed an extraordinary number of
former government officials as lobbyists.

PDF SOURCES:

http://www.wallstreetwatch.org/soldoutreport.htm

Formula for "Success" or "Evil," it works the same:

Money to attain Power. Power to protect Money.

No wonder financial services is now the biggest sector in the GDP and the manufacturing sector got sold to China.

[Orwellian_Ghost]

3. K&R

[Octafish]

7. Press reports document criminality of US financial elite

Here's a nice encapsulation of the problem:

Press reports document criminality of US financial elite

Tom Eley and Barry Grey
World Socialist Web Site
24 December 2008

Fallout from the Madoff scandal continues to batter investors, banks and private charities in the US, Europe and Japan. The massive fraud carried out by a prominent Wall Street insider, Bernard Madoff, the former head of the Nasdaq stock exchange, has exposed clients to as much as $50 billion in losses.

Recent press reports make clear that the Madoff affair is not an aberration. It is indicative of pervasive fraud and criminality in the highest echelons of the financial establishment, aided and abetted by government regulatory agencies.

On Monday, Truthout, an independent internet news service, published an interview with former Securities and Exchange Commission (SEC) investigative attorney Gary Aguirre. The SEC is the federal regulatory agency tasked with enforcing securities law and regulating stock exchanges and the securities industry.

As an attorney for the SEC, Aguirre launched an investigation several years ago into insider trading by the hedge fund Pequot Capital Management. Aguirre sought to subpoena one of Wall Street's most formidable figures, John Mack, then CEO of Credit Suisse and now the head of Morgan Stanley. But Aguirre "was told that Mack had ‘juice' (meaning he had access to senior-level SEC officers) and that he had heavy political connections to the Bush White House," according to San Diego Magazine. "In the middle of June 2005, his superiors told him to take a week's vacation. ... Before the week was up, he was unceremoniously fired, and the investigation was scuttled."

According to the Truthout account, the internal SEC watchdog found that Aguirre's supervisors acted improperly in firing Aguirre and shutting down the investigation, and recommended punishment against four SEC officials. But SEC Chairman Christopher Cox "refused to hold them accountable."

CONTINUED...

http://www.wsws.org/articles/2008/dec2008/pers-d24.shtm...

PS: Thank you, Orwellian_Ghost. I saw you found the report, but not the CounterPunch article. Yours is a logo I can love.

[Orwellian_Ghost]

14. Yes friend

We gotta get there.

Solidarity.

[killbotfactory]

8. The best government money can buy. nt

[Octafish]

10. It's a moneymaker. Like war.

For empire!

Know your BFEE: Merchants of Death

Thanks for understanding what it's all about, killbotfactory.

[slipslidingaway]

12. Kick for later, not sure if this is mentioned....

http://www.talkingpointsmemo.com/archives/2009/03/im_su...

"I'm sure the knowledgeable people already know this. But it turns out that one of the features of the 2005 Bankruptcy bill was to put derivative counter parties at the front of the line ahead of other creditors in bankruptcy proceedings. Actually, from what I can tell, they don't just go to the head of the line. They got to skip the line entirely. As the Financial Times noted last fall, "the 2005 changes made clear that certain derivatives and financial transactions were exempt from provisions in the bankruptcy code that freeze a failed company's assets until a court decides how to apportion them among creditors." As the article notes, ironically, this provision which Wall Street pushed for and got to protect investment banks actually ended up hastening the collapse of Lehman and Bear Stearns last year.

Down in the article there are also the mentions of the entertainingly named "International Swaps and Derivatives Association", one of the lobbies that helped get the change in place..."

[Octafish]

16. So, the crooks got the law they needed to get away with the loot - fair and square.

No wonder Jefferson feared privatized central banking.

The TARP thing shows that We the People got something worse than ripped off.
We were left holding a bag filled with I.O.U.s, apparently to the tune of $62 trillion.

Credit Default Swaps and Bank Leverage

naked capitalism
April 16, 2008

EXCERPT...

A bank holding company, after all, is thinly capitalized and in many ways was the precursor of the hedge fund model. On a parent-only basis, (J.P. Morgan's) $314 billion asset balance sheet includes $200 billion representing investments in its subsidiary banks and non-bank units, supported by half as much equity and more than $200 billion in debt.

And remember that JPM's on-balance sheet capital does not even partially support the counterparty risk of its vast OTC derivatives businesses, thus the (Bear Stearns Companies) acquisition was a "must do" deal for Mr. Dimon. Think of it this way: JPM is essentially an uncapitalized, $76 trillion OTC derivatives exchange with a $1.3 trillion asset bank appendage. By the way, we are working to include factors for OBS securitizations in the next iteration of our Economic Capital simulation in The IRA Bank Monitor.

But you understand that Fed officials still believe, even today, that the US markets are not over-leveraged.

The story goes that shortly after Ben Bernanke was confirmed as Fed Chairman, he attended a dinner in New York attended by the heads of the major banks. All the big banksters were there. After dinner, Chairman Bernanke gave a speech and he at one point reportedly commented that the financial markets were "not very leveraged," causing audible laughter from the audience.

According to one attendee, Lehman Brothers CEO Dick Fuld eventually spoke up and, while declaiming any intention to disagree with Chairman Bernanke publicly, told the newly minted Fed chief that his comments about the degree of leverage in the financial markets were mistaken. JPM CEO Jamie Dimon, who also attended the dinner, was reported to second Fuld's comments.

Who would have thought that only several months later, Fuld and Dimon, both of whom are directors of the Federal Reserve Bank of New York BTW, would be calling upon Chairman Bernanke to rescue them from leveraged OTC swamp? Guess they're not laughing now - or are they?

SOURCE: http://www.nakedcapitalism.com/2008/04/credit-default-s...

Thank you for the important information, slipslidingaway.
It illustrates clearly what we are up against:
Money does not give up power. Power does not give up money.

The People's roles:
indentured servitude and cannon fodder.

[slipslidingaway]

17. Looks that way doesn't it...

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


http://www.concurringopinions.com/archives/2008/09/the_...

"In part, AIG was too big to fail because it could owe an astronomical amount—allegedly about $300 BN—on credit default swaps issued to support mortgage-backed securities.

The problem, however, is not just the amount AIG owes, but the fact that these obligations are not like other obligations. They occupy a series of loopholes that make them unusually dangerous. Perhaps the greatest loophole of all came in the 2005 amendments to the Bankruptcy Code. Although designed ostensibly to “get tough” on profligate debtors, those amendments also made certain that CDS holders would get special treatment in bankruptcy—special treatment that may have made the Fed bailout inevitable..."


And as head of the NY Fereral Reserve Bank Geithner has been involved in all of these bailouts as well.

"Who would have thought that only several months later, Fuld and Dimon, both of whom are directors of the Federal Reserve Bank of New York BTW, would be calling upon Chairman Bernanke to rescue them from leveraged OTC swamp?"


September 16, 2008, 3:56 PM ET Geithner Skips FOMC Meeting to Stay in New York

http://blogs.wsj.com/economics/2008/09/16/geithner-skip... /



"It illustrates clearly what we are up against:
Money does not give up power. Power does not give up money.

The People's roles:
indentured servitude and cannon fodder."

And now the power and money is being consolidated into fewer hands, if they can hold things together.

[G_j]

13. thanks,

that's enough to set one's hair on fire,
Of course many of us have already been scorched, and lost track, in a world gone completely mad.

[formercia]

15. Junior poses with a guy he claims he doesn't know.

I won't say his name
but we already know
I can hear dead chickens roosting
upon the necks of former kings
History can be a cruel master