Friday, April 20, 2012

Shouldn't Barney Frank Be Able To Vote Ron Paul's Proxy When The House Financial Services Committee Votes On The Fed?


Before the great mortgage collapse that plunged the U.S. and most of the rest of the world into the Great Recession the banksters, according to the L.A. Times, knew they were playing with fire. Jim Puzzanghera and Scott Reckard reported exactly two years ago that “Before Washington Mutual collapsed in the largest bank failure in U.S. history, its executives knowingly created a ‘mortgage time bomb’ by making subprime loans they knew were likely to go bad and then packaging them into risky securities.”

Joshua Holland picked up the trail in his fantastic book, The Fifteen Biggest Lies About The Economy noted that according to the "the Wall Street Journal, U.S. prosecutors are [still] investigating whether Morgan Stanley misled investors about mortgage-derivatives deals it helped design and sometimes bet against.” I hope they're asking some of the investors.
And the Securities and Exchange Commission charged Goldman Sachs with “defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages as the U.S. housing market was beginning to falter.”

They needed some help laundering the risk out of those shaky loans, and they got it. A Senate panel investigating the roots of the crash “unveiled evidence that credit-ratings agencies knowingly gave
inflated ratings to complex deals backed by shaky U.S. mortgages in exchange for lucrative fees.”

Nobel Laureate Joseph Stiglitz neatly summed up the environment in which this took place:
"The mortgage brokers loved these new products because they ensured an endless stream of fees. They maximized their profits by originating as many mortgages as possible, with frequent refinancing. Their allies in investment banking bought them, sliced and diced the risk and then passed them on-- or at least as much as they could. Our bankers forgot that their job was to prudently manage risk and allocate capital. They became gambling casinos-- gambling with other people’s money, knowing that the taxpayer would step in if the losses were too great."

They wouldn’t have been able to do it without reckless deregulation for deregulation’s sake-- a bipartisan affair [corrupt conservatives on both sides of the aisle] fueled by the right-wing noise machine. Greed and the herd mentality are constants, after all; without regulations that protect the public interest, they can only lead to disaster.

As financial reporter Gillian Tett detailed in the Financial Times, a crucial moment in the development of the crisis occurred back in the mid- 1990s, when JP Morgan was struggling to deal with the huge number of loans on its books and needed large reserves of cash in case those loans went bad. It was at that moment when two groups of young JPM hotshots-- one that was creating those exotic new investments and another that was knee-deep in “subprime” loans-- started to talk to each other and realized that they could launder the risk out of sketchy home loans by securitizing

This discussion, which would lead to so much economic pain for millions of people around the world, could not have come to fruition without the demise of the Glass-Steagall Act in 1999. It forced firms to choose between writing loans and investment banking, but it was done in by a massive lobbying effort by investment bankers after the tech bubble had collapsed in 2000.

In the early 1990s, betting on interest rates was all the rage among higher-risk investors. But, as Tett noted, in the middle of the decade, “The interest rate climate suddenly changed, unleashing wild market turbulence and causing many of the derivatives contracts to produce huge losses-- or ‘blow up,’ as traders call it.” In the aftermath, these exotic investment products had a bad name, and there were widespread calls to regulate them.

But the International Swaps and Derivatives Association fought back furiously, arguing that a regulatory clampdown would not only run counter to the spirit of capital markets, but also crush creativity. Their aggressive lobbying campaign was effective: By the mid-1990s, regulatory pressure had died away.

Then, as the new century dawned, with little public debate, a group of lawmakers-- Republicans and “blue-dog” Democrats-- led by John McCain’s future chief economic adviser, Phil Gramm (who would gain some infamy by saying that the Great Recession was overblown and America had become a “nation of whiners), pushed through the “Commodity Futures Modernization Act of 2000,” which put the final nail in the regulatory coffin. The legislation provided us with what became known as the “Enron Loophole”-- which exempted most energy trading from oversight-- and it also assured Wall Street’s whiz kids that their new products would be free of pesky regulation. The popularity of those
investments soon exploded.

The Enron Loophole, like the Halliburton Loophole, was nice for a tiny handful of billionaire political donors but both were a catastrophe for normal American families. Conservative politicians, mostly Republicans but a handful of right-wing Democrats, made out like bandits as well. The bill essentially passed the House on July 1, 1999 343-86, just 69 Democrats and 16 Republicans putting the welfare of the citizens of this country first. I'm not going to name all 343 bad guys, but here a where-are-they-now list of some of the more noteworthy creeps ultimately responsible for crashing the economy:
Dick Armey (R-TX)- now chief Teababgger
Spencer Bachus (R-AL)- now head of the Financial Services Committee
Shelley Berkley (D-NV)- a thoroughly corrupt New Dem running for the U.S. Senate
Rod Blagojevich (D-IL)- rotting in prison on corruption charges
Roy Blunt (R-MO)- now a U.S. Senator and Romney's liaison with Senate Republicans
John Boehner (R-OH)- handsomely rewarded by Wall Street which bought him the Speakership
Richard Burr (R-NC)- now a Senator, who ran almost totally financed by banksters
Joe Crowley (D-NY)- head of the New Dems, under investigation by the House Ethics Committee
Duke Cunningham (R-CA)- rotting in a federal prison on multiple corruption convictions
Nathan Deal (R-GA)- now Governor of the most corrupt state in America
Tom DeLay (R-TX)- forced to resign from Congress, recently sentenced to prison, appealing
Jim DeMint (R-SC)- now a Senator and teabagger
John Doolittle (R-CA)- escaped criminal corruption charges by retiring from Congress
David Dreier (R-CA)- still in the closet
Mark Foley (R-FL)- outed; frequent guest on Bill Maher's show
Dick Gephardt (D-MO)- a lobbyist... sleazy!
Lindsey Graham (R-SC)- now a Senator + see "David Dreier" above
Ralph Hall (D-TX)- now a Republican, even more corrupt than before
Denny Hastert (R-IL)- forced to retire in a cesspool of corruption
Baron Hill (D-IN)- now one of the sleaziest lobbyists in Washington, DC
Tim Holden (D-PA)- likely to be defeated Tuesday over his corruption
Steny Hoyer (D-MD)- last seen trying to bolster Holden; hoping to be Speaker
John Kasich (R-OH)- now governor of Ohio; in contention for the worst in America
Ron Kind (D-WI)- vice chair of the corporate shills, The New Dems
Don Manzullo (R-IL)- recently stabbed in the back by Eric Cantor but will soon reemerge as a lobbyist
Buck McKeon (R-CA)- drowning in more scandals than anyone else in Congress
Bob Menendez (D-NJ)- shitty congressman is now a shitty senator
Bob Ney (R-OH)- served time in prison for corruption; now a dj
Rob Portman (R-OH)- now a senator and much touted as the most whitebread Romney VP pick
Ileana Ros-Lehtinen (R-FL)- still under the protection of Debbie Wasserman Schultz
Paul Ryan (R-WI)- Ayn Rand acolyte still serving Wall St. everyday and in every way
David Diapers Vitter (R-LA)- now calling hookers from the Senate floor instead of the House floor

Awesome, huh? So who were the heroes and heroines back in the day who just said no to Wall Street bribes and voted against this deregulation that proved so toxic? Here are a few noteworthy ones:
Tammy Baldwin (D-WI)- candidate for Senate
Sherrod Brown (D-OH)- now a senator
Barney Frank (D-MA)- still amazing, still driving Republicans insane... see below
Dennis Kucinich (D-OH)- looking for a new home; Atwater is calling his name
Barabra Lee (D-CA)- always right... about everything
John Lewis (D-GA)- still the conscience of the Congress (minus the Republicans)
Jerry Nadler (D-NY)- the Manhattan congressman who stands up to Wall Street
Ron Paul (R-TX)- managed to get it right... for the wrong reasons
Bernie Sanders (I-VT)- now a senator; always gets it right... for all the right reasons

Yesterday the Republicans in the House Financial Services Committee voted for some amemdments to further interfere with the functioning of the Consumer Financial Protection Bureau by subjecting the agency-- unlike similar agencies-- to bring the CFPB's budget under congressional control. Barney Frank, listened closely to the Republicans' fake piety about congressional control and proposed that it apply to the Federal Reserve as well. It stunned Wall Street hack Ed Royce (R-CA) into silence. And when the vote came, all the Republicans but two who are afraid of teabaggers-- Steve Stivers (OH) and Lynn Westmoreland (GA)-- voted against it. It failed 24-33, four Wall Street tools on the Democratic side, Joe Donnelly (Blue Dog-IN). Jim Himes (New Dem-CT), John Carney (New Dem-DE) and Gary Peters (New Dem-MI) rushing across the aisle to where the bankster bribes are. I wonder what North Carolina and Minnesota teabaggers would say if they ever found out Patrick McHenry and Michele Bachmann voted to protect the Fed from scrutiny. Barney, by the way, asked if he could vote for the absent Ron Paul but that was not allowed.

Let me leave off with a quote from NYU economist Nouriel Roubini, known as “Doctor Doom” for accurately predicting the crash:
"Today any wealthy individual can take $1 million and go to a prime broker and leverage this amount three times; then the resulting $4 million ($1 equity and $3 debt) can be invested in a fund or funds that will in turn leverage these $4 million three or four times and invest them in a hedge fund; then the hedge fund will take these funds and leverage them three or four times and buy some very junior tranche of a CDO that is itself leveraged nine or ten times. At the end of this credit chain, the initial $1 million of equity becomes a $100 million investment out of which $99 million is debt (leverage) and only $1 million is equity. So we got an overall leverage ratio of 100 to 1. Then, even a small 1% fall in the price of the final investment (CDO) wipes out the initial capital and creates a chain of margin calls that unravel this debt house of cards."

And these are the financial predators who have sworn to invest whatever it takes to install Romney in the White House and a Republican majority in the Senate. God help us all.

Labels: , , , , , ,


Post a Comment

<< Home