by Maureen Dowd
I’ve been loath to admit that the shrieking lunacy of the summer []had much to do with race.

Some people just can’t believe a black man is president and will never accept it.

George Tiller, advocate for reproductive rights for women, shot to death serving as usher at church

There are no words for how angry I am.

What can $5 billion buy in Washington?

Quite a lot.

Over the 1998-2008 period, the financial sector spent more than $5 billion on U.S. federal campaign contributions and lobbying expenditures.

This extraordinary investment paid off fabulously. Congress and executive agencies rolled back long-standing regulatory restraints, refused to impose new regulations on rapidly evolving and mushrooming areas of finance, and shunned calls to enforce rules still in place.

“Sold Out: How Wall Street and Washington Betrayed America,” a report released by Essential Information and the Consumer Education Foundation (and which I co-authored), details a dozen crucial deregulatory moves over the last decade — each a direct response to heavy lobbying from Wall Street and the broader financial sector, as the report details. (The report is available here.) Combined, these deregulatory moves helped pave the way for the current financial meltdown.

Here are 12 deregulatory steps to financial meltdown:

1. The repeal of Glass-Steagall

The Financial Services Modernization Act of 1999 formally repealed the Glass-Steagall Act of 1933 and related rules, which prohibited banks from offering investment, commercial banking, and insurance services. In 1998, Citibank and Travelers Group merged on the expectation that Glass-Steagall would be repealed. Then they set out, successfully, to make it so. The subsequent result was the infusion of the investment bank speculative culture into the world of commercial banking. The 1999 repeal of Glass-Steagall 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 led many of the banks to ruin and rocked the financial markets in 2008.

2. Off-the-books accounting for banks

Holding assets off the balance sheet generally allows companies to avoid disclosing “toxic” or money-losing assets to investors in order to make the company appear more valuable than it is. Accounting rules — lobbied for by big banks — permitted the accounting fictions that continue to obscure banks’ actual condition.

3. CFTC blocked from regulating derivatives

Financial derivatives are unregulated. By all accounts this has been a disaster, as Warren Buffett’s warning that they represent “weapons of mass financial destruction” has proven prescient — they have amplified the financial crisis far beyond the unavoidable troubles connected to the popping of the housing bubble. During the Clinton administration, the Commodity Futures Trading Commission (CFTC) sought to exert regulatory control over financial derivatives, but the agency was quashed by opposition from Robert Rubin and Fed Chair Alan Greenspan.

4. Formal financial derivative deregulation: the Commodities Futures Modernization Act

The deregulation — or non-regulation — of financial derivatives was sealed in 2000, with the Commodities Futures Modernization Act. Its passage orchestrated by the industry-friendly Senator Phil Gramm, the Act prohibits the CFTC from regulating financial derivatives.

5. SEC removes capital limits on investment banks and the voluntary regulation regime

In 1975, the Securities and Exchange Commission (SEC) promulgated a rule requiring investment banks to maintain a debt to-net capital ratio of less than 15 to 1. In simpler terms, this limited the amount of borrowed money the investment banks could use. In 2004, however, the SEC succumbed to a push from the big investment banks — led by Goldman Sachs, and its then-chair, Henry Paulson — and authorized investment banks to develop net capital requirements based on their own risk assessment models. With this new freedom, investment banks pushed ratios to as high as 40 to 1. This super-leverage not only made the investment banks more vulnerable when the housing bubble popped, it enabled the banks to create a more tangled mess of derivative investments — so that their individual failures, or the potential of failure, became systemic crises.

6. Basel II weakening of capital reserve requirements for banks

Rules adopted by global bank regulators — known as Basel II, and heavily influenced by the banks themselves — would let commercial banks rely on their own internal risk-assessment models (exactly the same approach as the SEC took for investment banks). Luckily, technical challenges and intra-industry disputes about Basel II have delayed implementation — hopefully permanently — of the regulatory scheme.

7. No predatory lending enforcement

Even in a deregulated environment, the banking regulators retained authority to crack down on predatory lending abuses. Such enforcement activity would have protected homeowners, and lessened though not prevented the current financial crisis. But the regulators sat on their hands. The Federal Reserve took 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.

8. Federal preemption of state enforcement against predatory lending

When the states sought to fill the vacuum created by federal non-enforcement of consumer protection laws against predatory lenders, the Feds — responding to commercial bank petitions — jumped to attention to stop them. The Office of the Comptroller of the Currency and the Office of Thrift Supervision each prohibited states from enforcing consumer protection rules against nationally chartered banks.

9. Blocking the courthouse doors: Assignee Liability Escape

Under the doctrine of “assignee liability,” anyone profiting from predatory lending practices should be held financially accountable, including Wall Street investors who bought bundles of mortgages (even if the investors had no role in abuses committed by mortgage originators). With some limited exceptions, however, assignee liability does not apply to mortgage loans, however. Representative Bob Ney — a great friend of financial interests, and who subsequently went to prison in connection with the Abramoff scandal — worked hard, and successfully, to ensure this effective immunity was maintained.

10. Fannie and Freddie enter subprime

At the peak of the housing boom, Fannie Mae and Freddie Mac were dominant purchasers in the subprime secondary market. The Government-Sponsored Enterprises were followers, not leaders, but they did end up taking on substantial subprime assets — at least $57 billion. The purchase of subprime assets was a break from prior practice, justified by theories of expanded access to homeownership for low-income families and rationalized by mathematical models allegedly able to identify and assess risk to newer levels of precision. In fact, the motivation was the for-profit nature of the institutions and their particular executive incentive schemes. Massive lobbying — including especially but not only of Democratic friends of the institutions — enabled them to divert from their traditional exclusive focus on prime loans.

Fannie and Freddie are not responsible for the financial crisis. They are responsible for their own demise, and the resultant massive taxpayer liability.

11. Merger mania

The effective abandonment of antitrust and related regulatory principles over the last two decades has enabled a remarkable concentration in the banking sector, even in advance of recent moves to combine firms as a means to preserve the functioning of the financial system. The megabanks achieved too-big-to-fail status. While this should have meant they be treated as public utilities requiring heightened regulation and risk control, other deregulatory maneuvers (including repeal of Glass-Steagall) enabled them to combine size, explicit and implicit federal guarantees, and reckless high-risk investments.

12. Credit rating agency failure

With Wall Street packaging mortgage loans into pools of securitized assets and then slicing them into tranches, the resultant financial instruments were attractive to many buyers because they promised high returns. But pension funds and other investors could only enter the game if the securities were highly rated.

The credit rating agencies enabled these investors to enter the game, by attaching high ratings to securities that actually were high risk — as subsequent events have revealed. The credit rating agencies have a bias to offering favorable ratings to new instruments because of their complex relationships with issuers, and their desire to maintain and obtain other business dealings with issuers.

This institutional failure and conflict of interest might and should have been forestalled by the SEC, but the Credit Rating Agencies Reform Act of 2006 gave the SEC insufficient oversight authority. In fact, the SEC must give an approval rating to credit ratings agencies if they are adhering to their own standards — even if the SEC knows those standards to be flawed.

From a financial regulatory standpoint, what should be done going forward? The first step is certainly to undo what Wall Street has wrought. More in future columns on an affirmative agenda to restrain the financial sector.

None of this will be easy, however. Wall Street may be disgraced, but it is not prostrate. Financial sector lobbyists continue to roam the halls of Congress, former Wall Street executives have high positions in the Obama administration, and financial sector propagandists continue to warn of the dangers of interfering with “financial innovation.”

The Wall Street crew want to cut Social Security and Medicare at a time when US workers need help the most

Related:
Virtually without challenge, Pete Peterson claims to be a champion of the middle class. But his proposals would actually cut taxes for the rich and benefits for middle-income people.

Inauguration by Mark Fiore

I have a Dream

“Fellow citizens, we cannot escape history.”

That is what he said. That is what Abraham Lincoln said.

“Fellow citizens, we cannot escape history. We of this congress and this administration will be remembered in spite of ourselves. No personal significance or insignificance can spare one or another of us. The fiery trial through which we pass will light us down in honor or dishonor to the latest generation. We, even we here, hold the power and bear the responsibility.” [Annual Message to Congress, December 1, 1862]

He was born in Kentucky, raised in Indiana, and lived in Illinois. And this is what he said. This is what Abe Lincoln said.

“The dogmas of the quiet past are inadequate to the stormy present. The occasion is piled high with difficulty and we must rise with the occasion. As our case is new, so we must think anew and act anew. We must disenthrall ourselves and then we will save our country.” [Annual Message to Congress, December 1, 1862]

When standing erect he was six feet four inches tall, and this is what he said.

He said: “It is the eternal struggle between two principles, right and wrong, throughout the world. It is the same spirit that says ‘you toil and work and earn bread, and I’ll eat it.’ No matter in what shape it comes, whether from the mouth of a king who seeks to bestride the people of his own nation, and live by the fruit of their labor, or from one race of men as an apology for enslaving another race, it is the same tyrannical principle.” [Lincoln-Douglas debates, 15 October 1858]

Lincoln was a quiet man. Abe Lincoln was a quiet and a melancholy man. But when he spoke of democracy, this is what he said.

He said: “As I would not be a slave, so I would not be a master. This expresses my idea of democracy. Whatever differs from this, to the extent of the difference, is no democracy.”

Abraham Lincoln, sixteenth president of these United States, is everlasting in the memory of his countrymen. For on the battleground at Gettysburg, this is what he said:

He said: “That from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion. That we here highly resolve that these dead shall not have died in vain. That this nation under God shall have a new birth of freedom and that government of the people, by the people, and for the people shall not perish from the earth.”

WHAT
I WANT FOR CHRISTMAS.

Robert Green Ingersoll

The Arena,
Boston, December 1897.

..If I had the power
to produce exactly what I want for next Christmas, I would have all the kings
and emperors resign and allow the people to govern themselves.

I would have all the
nobility crop their titles and give their lands back to the people.
I would
have the Pope throw away his tiara, take off his sacred vestments, and admit
that he is not acting for God — is not infallible — but is just an ordinary
Italian.
I would have all the cardinals, archbishops, bishops, priests and
clergymen admit that they know nothing about theology, nothing about hell
or heaven, nothing about the destiny of the human race, nothing about devils
or ghosts, gods or angels.
I would have them tell all their “flocks” to think
for themselves, to be manly men and womanly women, and to do all in their
power to increase the sum of human happiness.

I would have all the
professors in colleges, all the teachers in schools of every kind, including
those in Sunday schools, agree that they would teach only what they know,
that they would not palm off guesses as demonstrated truths.

I would like to see all
the politicians changed to statesmen, — to men who long to make their country
great and free, — to men who care more for public good than private gain
– men who long to be of use.

I would like to see all
the editors of papers and magazines agree to print the truth and nothing but
the truth, to avoid all slander and misrepresentation, and to let the private
affairs of the people alone.

I would like to see drunkenness
and prohibition both abolished.

I would like to see corporal
punishment done away with in every home, in every school, in every asylum,
reformatory, and prison.
Cruelty hardens and degrades, kindness reforms and
ennobles.

I would like to see the
millionaires unite and form a trust for the public good.

I would like to see a
fair division of profits between capital and labor, so that the toiler could
save enough to mingle a little June with the December of his life.

I would like to see an
international court established in which to settle disputes between nations,
so that armies could be disbanded and the great navies allowed to rust and
rot in perfect peace.

I would like to see the
whole world free — free from injustice — free from superstition.

This will do for next
Christmas. The following Christmas, I may want more.

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Call to Action by Ron Howard