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Author: Subject: Wall Street and What Really Happened

Zen Peach





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  posted on 3/5/2009 at 09:12 PM
http://www.wallstreetwatch.org/soldoutreport.htm

By Marina Litvinsky

March 4, 2009 -- WASHINGTON, Mar 4 (IPS) - A new report says that Wall Street has only itself to blame for the misguided deregulation that led to the current deepening financial crisis.

Issued Wednesday by Essential Information and the Consumer Education Foundation, the report documents billions of dollars spent by the financial sector on what would eventually be their own downfall.

The 231-page report, "Sold Out: How Wall Street and Washington Betrayed America," shows that the financial sector invested more than 5 billion dollars on purchasing political influence in Washington over the past decade, with as many as 3,000 lobbyists winning deregulation and other policy decisions that led directly to the current financial collapse.

"The report details, step-by-step, how Washington systematically sold out to Wall Street," said Harvey Rosenfield, president of the California-based non-profit organisation Consumer Education Foundation.

"Depression-era programmes 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," he said. "Americans were betrayed, and we are paying a high price - trillions of dollars - for that betrayal."

According to the report, government regulators, Congress and the executive branch have, on a bipartisan basis, spent the past three decades steadily eroding the regulatory system that restrained the financial sector from acting on its own worst tendencies.

From 1998-2008, Wall Street investment firms, commercial banks, hedge funds, real estate companies and insurance conglomerates made political contributions totalling 1.725 billion dollars and spent another 3.4 billion on lobbyists - a financial juggernaut aimed at undercutting federal regulation.

"Congress and the Executive Branch 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," said Robert Weissman of Essential Information and the lead author of the report.

"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," he said. "Now, there is wreckage across the financial landscape."

The report documents a dozen distinct deregulatory moves that, in concert, led to the financial meltdown.

For example, the "rise of the culture of recklessness" was aided by the repeal of the Glass-Steagall Act. The Financial Services Modernisation Act of 1999 formally repealed the 1933 statute and related laws, which prohibited commercial banks from offering investment banking and insurance services. Erasing them from the books helped create the conditions in which banks invested monies from checking and savings accounts into creative financial instruments such as mortgage-backed securities and credit default swaps - investment gambles that rocked the financial markets in 2008.

The report also said that banking regulators retained authority to crack down on predatory lending abuses, which would have protected homeowners and lessened the current financial crisis if the regulators hadn’t "sat on their hands." The Federal Reserve took just three formal actions against subprime lenders from 2002 to 2007. The Office of Comptroller of the Currency, which has authority over almost 1,800 banks, took three consumer-protection enforcement actions from 2004 to 2006.

Another deregulatory federal law that benefited mortgage lenders at the expense of the public deals with assignee liability. It states that with limited exceptions, only the original mortgage lender is liable for any predatory and illegal features of a mortgage - even if the mortgage is transferred to another party.

The report points out that this arrangement effectively immunised acquirers of the mortgage ("assignees") for any problems with the initial loan, and relieved them of any duty to investigate the terms of the loan. Wall Street interests could purchase, bundle and securitise subprime loans, including many with pernicious, predatory terms, without fear of liability for illegal loan terms.

The arrangement left victimised borrowers with no cause of action against anyone but the original lender, and typically with no defences against being foreclosed upon.

Other misdeeds that led to the financial crisis include prohibitions on regulating financial derivatives; a voluntary regulation scheme for big investment banks; and the repeal of regulatory barriers between commercial banks and investment banks.

The report presents data on financial firms’ campaign contributions and disclosed lobbying investments, which supports its claim that "political decisions were influenced by political expenditures and extraordinary lobbying," as Weissman put it.

For example, securities firms invested more than 504 million dollars in campaign contributions, and an additional 576 million dollars in lobbying, while commercial banks spent more than 154 million dollars on campaign contributions and invested 383 million dollars in officially registered lobbying.

Individual firms spent tens of millions of dollars each. During the decade-long period Goldman Sachs spent more than 46 million dollars on political influence buying; Citigroup spent more than 108 million; and the now defunct Merrill Lynch spent more than 68 million dollars.

According to the report, the financial contributions were bipartisan: about 55 percent of the political donations went to Republicans and 45 percent to Democrats, primarily reflecting the balance of power over the decade. Democrats took just more than half of the Wall Street’s 2008 election cycle contributions.

The financial sector also bolstered its political strength by placing Wall Street expatriates in top regulatory positions, including the post of Treasury Secretary held by two former Goldman Sachs chairs, Robert Rubin and Henry Paulson.

Financial firms employed a legion of lobbyists - maintaining nearly 3,000 separate lobbyists in 2007 alone. Insurance companies had 1,219 lobbyists working for them; Real estate interests hired 1,142.

These firms drew heavily from former government officials in choosing their lobbyists. Surveying 20 leading financial firms, the report found that 142 of the lobbyists they employed from 1998-2008 were previously high-ranking officials or employees in the executive branch or Congress.

"It’s very important to identify the causes of the crisis if we are to fix it and prevent it from occurring again," Weissman told IPS, speaking to the report’s relevance.

He adds that one of the ways through which many deregulatory moves were justified was the claim that they facilitated "financial innovation - a buzz word on Wall Street and Washington."

"Our review suggests that while there may be some innovations that are socially beneficial, in general (financial innovation has served as) a code word for complexity," he explained. "It has been a means for Wall St. to confuse consumers and investors, extract money from them and the overall economy, and build up a house of cards that has now tumbled down to disastrous effects."

The report calls on Congress to adopt the view that Wall Street has no legitimate seat at the table. "This time, legislating must be to control Wall Street, not further Wall Street’s control," it says.

"The first substantive recommendation we make is to undue the deregulatory decisions that we have profiled," said Weissman.

Other recommendations include prohibiting some forms of financial instruments, as well as a financial transaction tax to slow down speculation and curb the turbulence in the markets.

Remarks: That's right, the financial sector just paid off Washington bureaucrats to allow them to do whatever they pleased.

 

____________________
"Mankind is a single nation" "Allah did not make you a single people so he could try you in what he gave you, to him you will all return, he will inform you where you differed". Quran Chapter 2 Sura 213

 
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Zen Peach



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  posted on 3/5/2009 at 09:23 PM
The FDIC may be bankrupt by the end of the year also. Those are the people who insure your money if your bank fails.

http://www.bloomberg.com/apps/news?pid=washingtonstory&sid=alsJZqIFuN3k

By Alison Vekshin

March 4 (Bloomberg) -- Federal Deposit Insurance Corp. Chairman Sheila Bair said the fund it uses to protect customer deposits at U.S. banks could dry up amid a surge in bank failures, as she responded to an industry outcry against new fees approved by the agency.

“Without these assessments, the deposit insurance fund could become insolvent this year,” Bair wrote in a March 2 letter to the industry. U.S. community banks plan to flood the FDIC with about 5,000 letters in protest of the fees, according to a trade group.

“A large number” of bank failures may occur through 2010 because of “rapidly deteriorating economic conditions,” Bair said in the letter. “Without substantial amounts of additional assessment revenue in the near future, current projections indicate that the fund balance will approach zero or even become negative.”

The FDIC last week approved a one-time “emergency” fee and other assessment increases on the industry to rebuild a fund to repay customers for deposits of as much as $250,000 when a bank fails. The fees, opposed by the industry, may generate $27 billion this year after the fund fell to $18.9 billion in the fourth quarter from $34.6 billion in the previous period, the FDIC said.

The fund, which lost $33.5 billion in 2008, was drained by 25 bank failures last year. Sixteen banks have failed so far this year, further straining the fund.

Angry Bankers

Smaller banks are outraged over the one-time fee, which could wipe out 50 percent to 100 percent of a bank’s 2009 earnings, Camden Fine, president of the Independent Community Bankers of America, said yesterday in a telephone interview.

“I’ve never seen emotions like this,” said Fine, adding that he’s received more than 1,000 e-mails and telephone messages from angry bankers.

“The FDIC realizes that these assessments are a significant expense, particularly during a financial crisis and recession when bank earnings are under pressure,” Bair wrote. “We did not want to impose large assessments when the industry and economy are struggling. We searched for alternatives but found none better.”

The agency, which has released the change for 30 days of public comment, could modify the assessment to shift the burden to the large banks “that caused this train wreck,” Fine said. “Community bankers are feeling like they are paying for the incompetence and greed of Wall Street,” he said.

Legal Constraints

Bair dismissed that suggestion.

“For risk-based assessments, our statute restricts us from discriminating against an institution because of size,” Bair wrote.

The deposit insurance fund won’t dry up because the government can get funds from the industry and congressional appropriations, and borrow from the Treasury, Chip MacDonald, a partner specializing in financial services at law firm Jones Day, said today in a telephone interview.

“As a depositor, I am not worried in the least,” MacDonald said. “No one is going to let the FDIC go without any money.”

Consumers should watch this issue closely, said Edmund Mierzwinski, consumer program director at U.S. PIRG, a Boston- based consumer-watchdog group.

“I wouldn’t take their money out of the bank yet,” Mierzwinski said. “If the FDIC is saying that there is this serious problem, then we should all be concerned. I think there is a chance the FDIC is going to have to ask taxpayers for money in the future.”

No Taxpayer Funds

Bair rejected arguments that the agency should use government aid to rebuild the fund. The FDIC has authority to tap a $30 billion line of credit at the Treasury Department and legislation pending in Congress would boost the amount to $100 billion.

“Banks, not taxpayers, are expected to fund the system,” Bair said. Asking for taxpayer support “could paint all banks with the ‘bailout’ brush.”

The FDIC “will revise the interim rule, if appropriate, in light of the comments received,” the agency said in a Federal Register notice.


Last Updated: March 4, 2009 14:17 EST



[Edited on 3/6/2009 by gina]

 

____________________
"Mankind is a single nation" "Allah did not make you a single people so he could try you in what he gave you, to him you will all return, he will inform you where you differed". Quran Chapter 2 Sura 213

 

Zen Peach



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  posted on 3/5/2009 at 10:04 PM
There is an answer from the most unlikely of places.

http://www.webofdebt.com/articles/state_bank_option.php



 

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"Mankind is a single nation" "Allah did not make you a single people so he could try you in what he gave you, to him you will all return, he will inform you where you differed". Quran Chapter 2 Sura 213

 

Zen Peach



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  posted on 3/5/2009 at 10:05 PM
If some effect snappy changes aren't put into place to help each state, things will get much, much worse. They haven't even looked at the pension funds who have not been invested with at least 8% return on the money. Those approaching retirement think they will be safe. Guess again.

 

____________________
"Mankind is a single nation" "Allah did not make you a single people so he could try you in what he gave you, to him you will all return, he will inform you where you differed". Quran Chapter 2 Sura 213

 

Zen Peach



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  posted on 3/5/2009 at 10:40 PM
What happened is really pretty simple. There have been a lot more sellers than buyers, starting around October 2008. There's not enough confidence in the future (yet) for enough buyers to step up and start turning it positive.

 

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World Class Peach



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  posted on 3/5/2009 at 11:06 PM
Buy high, sell low.

It's gotten me where I am today.

 

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Zen Peach



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  posted on 3/6/2009 at 01:28 AM
As GM goes...so goes the economy ...

 

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If we practice and eye for an eye and a tooth for a tooth, soon the whole world will be blind and toothless. -Mahatma Gandhi.

 

Sublime Peach



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  posted on 3/6/2009 at 01:41 AM
So Wallstreet is to blame for Washington having lobbyist that payoff politicians to vote one way or another for legislation that helps them make money?

Why aren't the politicians to blame for taking the money and deregulating Glass-Steagall?

I say Washington is to blame, but there is no one to police them. The propoganda of the media is doing a very good job of deflecting the blame to Wallstreet and away from the real culprits, the politicians. They are the ones to blame, period. Wallstreet was only using the tools DC gave them to make money.

I thought Mr. Obama was going to get rid of lobbyist? LIE!
I thought Mr. Obama was going to end ear marks? LIE!
I thought Mr. Obama was going to have transparency? LIE!

Why hasn't Glass-Steagall been re-instated?
Why hasn't the up-tick rule been re-instated?

They aren't fixing anything in DC, they are making it worse. Would anyone here take money out their own bank accounts and lend AIG money? So why is the government doing it with our kids money and future?

 

Zen Peach



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  posted on 3/6/2009 at 01:45 AM
quote:
So Wallstreet is to blame for Washington having lobbyist that payoff politicians to vote one way or another for legislation that helps them make money?

Why aren't the politicians to blame for taking the money and deregulating Glass-Steagall?

I say Washington is to blame, but there is no one to police them. The propoganda of the media is doing a very good job of deflecting the blame to Wallstreet and away from the real culprits, the politicians. They are the ones to blame, period. Wallstreet was only using the tools DC gave them to make money.

I thought Mr. Obama was going to get rid of lobbyist? LIE!
I thought Mr. Obama was going to end ear marks? LIE!
I thought Mr. Obama was going to have transparency? LIE!

Why hasn't Glass-Steagall been re-instated?
Why hasn't the up-tick rule been re-instated?

They aren't fixing anything in DC, they are making it worse. Would anyone here take money out their own bank accounts and lend AIG money? So why is the government doing it with our kids money and future?



I thought you were moving to Belize. LIE

 

____________________
If we practice and eye for an eye and a tooth for a tooth, soon the whole world will be blind and toothless. -Mahatma Gandhi.

 

Sublime Peach



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  posted on 3/6/2009 at 02:16 AM
Corporatocracy of America! Pretty simple. But you won't hear it from the media! Huh!
http://www.youtube.com/watch?v=ROBHkvXoqmE



Bubba lying about his involvment in this crisis!
http://www.youtube.com/watch?v=BQwaS0Qtswo

Fannie/Freddie Trial and how the community reinvestmant act helped get us here!
http://www.youtube.com/watch?v=_MGT_cSi7Rs

 

Zen Peach



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  posted on 3/6/2009 at 11:56 AM
Silly jpb, post something of substance please ...

 

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Zen Peach



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  posted on 3/6/2009 at 11:03 PM
quote:
As GM goes...so goes the economy ...


GM's going down in 30 days if it doesn't get more money.

http://www.guardian.co.uk/business/2009/mar/05/gm-bankruptcy-warning

General Motors today warned it would go bust within 30 days unless theUS treasury gives it a further multi-billion dollar loan.

The dramatic warning from America's biggest car group came after its auditor, Deloitte, raised substantial doubts about its ability to continue operations as a going concern.

These alarm signals were contained in GM's 480-page annual report for 2008 to the US Securities and Exchange Commission, America's financial regulator. They further underline the parlous state of the global car industry.

GM has so far received $13.4bn (£9.5bn) in treasury loans and a further $1.6bn in other government loans. Today , effectively holding a gun to the government's head, it said it could default on this $15bn if it did not receive a further cash injection.

It is seeking a total of $30bn from the Obama administration after racking up $82bn of losses in the last three years, including $31bn last year.

The group, once the world's biggest carmaker, said it needed $3.5bn cash in 2009 and a further $2.3bn to 2014 to stay alive. The plan it has submitted to Tim Geithner, the US treasury secretary, envisages 47,000 job losses – 26,000 outside the US.

"If we are not successful in obtaining the additional funding necessary to execute our restructuring plan... we would be required to take additional actions to continue operations," its SEC filing said.

But the report added: "However, there can be no assurance that these actions, such as further reductions in productive capacity, hourly and salaried headcount, employee compensation and benefits or capital expenditure and engineering spending would be sufficient to prevent the need for us to potentially seek relief through a filing under the bankruptcy laws in the US and other jurisdictions."

GM cautioned that if the treasury did not approve its viability plan and lend it more money "we would be unable to repay amounts outstanding under the treasury loan facility or other indebtedness as they become due which would cause us to default".

It could then breach its banking covenants and declare itself bankrupt – with no guarantee even then it could secure financing to continue operations under the Chapter 11 bankruptcy protection laws.

But the group headed by Rick Wagoner said it had secured waivers from its creditors for an outstanding $6.125bn so far, following the auditors' statement, in the event that the Treasury helped it out again. "We believe that only the US government can provide such financing, directly or indirectly, through guarantees," it added.

GM Europe, meanwhile, poured cold water on reports that it was seeking between £440m and £750m from the British government as part of the €3.3bn rescue plan submitted to the German government last week.

Vauxhall, its UK unit, with plants at Ellesmere Port and Luton, contributes around a quarter of GME's European business, prompting what industry sources called the entirely speculative calculations. "We have not got to that stage yet," the sources said. "When the German government has finished reviewing the plan we will submit it to Lord Mandelson [the business secretary] and that will be next week at the earliest."

It is understood that Vauxhall could apply for a share of the £2.1bn loan facility for the British auto industry approved by the European Investment Bank, the EU's main lending arm.

Mandelson has indicated he is willing to support Vauxhall and its two plants, both of which have been excluded from the three GME is seeking to close in Europe.

 

____________________
"Mankind is a single nation" "Allah did not make you a single people so he could try you in what he gave you, to him you will all return, he will inform you where you differed". Quran Chapter 2 Sura 213

 

Zen Peach



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  posted on 3/6/2009 at 11:05 PM
It's not just GM that is having a problem.

http://english.aljazeera.net/business/2009/03/20093393113452846.html

 

____________________
"Mankind is a single nation" "Allah did not make you a single people so he could try you in what he gave you, to him you will all return, he will inform you where you differed". Quran Chapter 2 Sura 213

 

Zen Peach



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  posted on 3/6/2009 at 11:09 PM
quote:
quote:
So Wallstreet is to blame for Washington having lobbyist that payoff politicians to vote one way or another for legislation that helps them make money?

Why aren't the politicians to blame for taking the money and deregulating Glass-Steagall?

I say Washington is to blame, but there is no one to police them. The propoganda of the media is doing a very good job of deflecting the blame to Wallstreet and away from the real culprits, the politicians. They are the ones to blame, period. Wallstreet was only using the tools DC gave them to make money.

I thought Mr. Obama was going to get rid of lobbyist? LIE!
I thought Mr. Obama was going to end ear marks? LIE!
I thought Mr. Obama was going to have transparency? LIE!

Why hasn't Glass-Steagall been re-instated?
Why hasn't the up-tick rule been re-instated?

They aren't fixing anything in DC, they are making it worse. Would anyone here take money out their own bank accounts and lend AIG money? So why is the government doing it with our kids money and future?



I thought you were moving to Belize. LIE
LMAO Jon!!!

 

____________________
"Come on down to the Mermaid Cafe and I will buy you a bottle of wine, and we'll laugh and toast to nothing and smash our empty glasses down..."

 

Zen Peach



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  posted on 3/6/2009 at 11:17 PM
quote:

According to the report, government regulators, Congress and the executive branch have, on a bipartisan basis, spent the past three decades steadily eroding the regulatory system that restrained the financial sector from acting on its own worst tendencies.



Both Republican and Democratic congresses and white houses all took the payola


we get the best Gov't that money can buy!




 

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