Robert Scheer - The Democrats Who Unleashed Wall Street and Got Away With It

[kpete]

Robert Scheer
The Democrats Who Unleashed Wall Street and Got Away With It
Posted on Feb 2, 2012


AP / Pablo Martinez Monsivais
Former presidents George W. Bush and Bill Clinton, right, share a laugh in 2006. Both men share blame for the economic collapse of 2008. It was Clinton’s financial deregulation that legalized the merger of commercial and investment banks, creating institutions that were both risky and too-big-to-fail.

By Robert Scheer

That Lawrence Summers, a president emeritus of Harvard, is a consummate distorter of fact and logic is not a revelation. That he and Bill Clinton, the president he served as treasury secretary, can still get away with disclaiming responsibility for our financial meltdown is an insult to reason.

Yet, there they go again. Clinton is presented, in a fawning cover story in the current edition of Esquire magazine, as “Someone we can all agree on. ... Even his staunchest enemies now regard his presidency as the good old days.” In a softball interview, Clinton is once again allowed to pass himself off as a job creator without noting the subsequent loss of jobs resulting from the collapse of the housing derivatives bubble that his financial deregulatory policies promoted.

At least Summers, in a testier interview by British journalist Krishnan Guru-Murthy of Channel 4 News, was asked some tough questions about his responsibility as Clinton’s treasury secretary for the financial collapse that occurred some years later. He, like Clinton, still defends the reversal of the 1933 Glass-Steagall Act, a 1999 repeal that destroyed the wall between investment and commercial banking put into place by Franklin Roosevelt in response to the Great Depression.

“I think the evidence is that I am right about that. If you look at the big players, Lehman and Bear Stearns were both standalone investment banks,” Summers replied, referring to two investment banks allowed to fold. Summers is very good at obscuring the obvious truth—that the too-big-to-fail banks, made legal by Clinton-era deregulation, required taxpayer bailouts.

.............

the rest:
http://www.truthdig.com/report/item/the_democrats_who_unleashed_wall_street_and_got_away_with_it_20120202/

[xchrom]

1. du rec. nt

[think]

2. Let the chips fall where they may. The repeal of Glass-Steagall

never should have happened.

[yurbud]

3. Summers, Rubin, in their ilk should never darken the halls of power again except

to answer subpoenas and face indictments.

[eomer]

11. But of course their ilk did in the intervening years and do now.

Secretary of Treasury Geithner being an obvious example.

[yurbud]

13. making Geithner Treasury Second is like making cops

Who let Jeffrey Dahmer go when they caught him chasing a naked bleeding victim the head of a serial killer task force.

Except those guys made an honest mistake.

[progressoid]

4. Sounds like somebody didn't get his pony!

K&R for Scheer.

[proverbialwisdom]

5. http://billmoyers.com/

Don't miss this:

http://billmoyers.com/segment/john-reed-on-big-banks-power-and-influence/

John Reed on Big Banks’ Power and Influence

January 27, 2012

Bill Moyers talks with former Citigroup Chairman John Reed to explore a momentous instance: how the mid-90’s merger of Citicorp and Travelers Group – and a friendly Presidential pen — brought down the Glass-Steagall Act, a crucial firewall between banks and investment firms which had protected consumers from financial calamity since the aftermath of the Great Depression. In effect, says Moyers, they put the watchdog to sleep.

There’s no clearer example of the collusion between government and corporate finance than the Citicorp-Travelers merger, which — thanks to the removal of Glass-Steagall — enabled the formation of the financial behemoth known as Citigroup. But even behemoths are vulnerable; when the meltdown hit, the bank cut more than 50,000 jobs, and the taxpayers shelled out more than $45 billion to save it.

Now, John Reed regrets his role in the affair, and says lifting the Glass Steagall protections was a mistake. Given the 2008 meltdown, he’s surprised Wall Street still has so much power over Washington lawmakers.

“I’m quite surprised the political establishment would listen to groups that have been so discredited,” Reed tells Moyers. “It wasn’t that there was one or two or institutions that, you know, got carried away and did stupid things. It was, we all did… And then the whole system came down.”

FULL TRANSCRIPT:

BILL MOYERS: Welcome to our third episode about the powerful players in high places who rewrote the rules of American politics and the economy. You can read all about it in this book: Winner-Take-All Politics: How Washington Made the Rich Richer and Turned Its Back on the Middle Class.

If you missed the first two programs, you can see them on our new website, BillMoyers.com. The first is with Winner-Take-All authors Jacob Hacker and Paul Pierson; the second with David Stockman and Gretchen Morgenson on “crony capitalism.”

In this edition, we’ll look at a seminal moment when Wall Street and Washington stacked the deck against the rest of us.

Remember, this is the political equivalent of a crime story, a mystery. How is it that our economy stopped working for the broad majority of Americans? How did our political and financial class shift the benefits of the economy to the very top, while saddling us with greater debt and tearing new holes in the safety net? In other words, how did politics create a winner-take-all economy?

More at link.

[elleng]

10. Thanks. Good one. Saw it twice.

[INdemo]

15. i watched video and it all sounded good but it was Reed

who was made very wealthy because of the repeal of Glass Steagall and I did not hear say a any point in the interview that he was going to give his several $30 million bonuses back or donate them a fund to save homeowners from forclosure..He knew what he was doing was wrong ,he lobbied congress to get the merger through with CITI bank and travelers and mad a fortune ...Its like interviewing the fox smiling as he licks his chops with a few feathers in the corner of his mouth.

[Bill USA]

17. I saw this. Reed was good but it made it seem as if repeal of Glass-steagle was whole story not so.

That by itself did not do it. (note Reed retired in 2000 so everything after that he didn't talk about - because he was talking about what he knew of first hand). It took the CFMA (slipped in as a rider to the Omnibus Funding bill, 2000, by Phil Gramm), and the Bush administration stoppiing 50 (yes, fifty) states Attorneys-General from reining in predatory lenders.

if interested check out link:

http://www.democraticunderground.com/101611537#post16

[patrice]

6. And so, does it stand that Clinton's cadre of early-adopters would be more guilty than later ones?

Or, (having a body of gambling info available, including awareness of phony securities ratings, not to mention the fact implicit in the duration of the gambling that "snake eyes" was due) are the later gamblers more guilty?

Hasn't this been Obama's problem all along? If he must do something about this, how was he to get the responsible parties, without hurting anyone who didn't REALLY need punishing? If you just punish everyone, they ALL have an EXCUSE to not do what would make recovery possible, right?

[Tomay]

7. An excellent reminder

that the collapse of 2008 was a bipartisan creation. Attempts to ignore this simply obscure the corporate corruption of our political system.

[antigop]

8. +1000. n/t

[cbrer]

14. ++

It illustrates that, though a poor tool the OWS movement is, SOMETHING has to produce real change in the American political arena.

[Hell Hath No Fury]

9. The Truth hurts.

Clinton - the beginning of the end for the modern day Democrats.

[bvar22]

12. DURec.

Sad but true.
I hoped that by supporting Obama,
we would be able to move beyond the DLC, "Crony Centrism", Ignoring The FDR/LBJ Left, and Triangulation,
but I was wrong, and had it shoved in my face on Day One.

The DLC New Team
[/font]
(Screen Capped from the DLC Website)
http://www.dlc.org/ndol_ci.cfm?contentid=254886&kaid=86&subid=85

I can still hear James Carville laughing at how easily they scammed me.



You will know them by their WORKS,
not by their promises.
[font size=5 color=green][center]Solidarity99![/font][font size=2 color=green]
--------------------------------------------------------------------------------------------------------------------------------[/center]

[Bill USA]

16. seen this bull before. as if repealing Glass-steagle caused the trickle down disaster itself. NOT

I remember in the latter part of the 90's how people in and out of the Government were concerned about the competitiveness of Wall Street banks given that Japanese banks were getting huge and that London exchanges were beginning to offer electronic trading options that our exchanges and banks could not offer.

NOw, repealing Glass-steagle was a bad idea but Clinton a man who is well known for academic brilliance and considerable naivete when it comes to 'street-smarts', thought that the banking system would be monitored and regulated. Ha-ha. He didn't recognize how hostile to regulation Republicans would be.

RE: the Commodities Futures Modernization Act. THIS is what really blew up the system. The CFMA allowed for trading of Credit Default Swaps by banks WITHOUT ANY REGULATION. The article referred to has some blatant misrepresentations in it. The author makes it sound like Clinton or anybody in Congress knew they were signing the CFMA into law.

This is a standard FUCKING LIE FROM THE RIGHT. HERE'S WHAT HAPPENED. the CFMA could not get out of committee for months despite the ardent lobbying for it by Phil Gramm. Democrats were suspicous of it. Finally, in Dec 2000, in the last few days of that congressional session, just before they were set to leave for their christmas break, Congress was to vote on the Omnibus Funding bill. This bill HAD to pass to make sure the Government would be funded for the next year. Phil Gramm slipped the CFMA into this 11,000 page bill AS A RIDER. NOBODY EVEN KNEW THE CFMA WAS IN THERE. The Omnibus Funding bill was passed with a few days to spare and Clinton signed it (Dec 21, 2000). But nobody knew the CFMA was in there. See; Who Wrecked the Economy: Foreclosure Phil.

Now, it was the CDSs that really made everything blow up. The CDSs are what made Collaterized DEbt Obligations composed of high-rate mortgages (i.e. sub-Prime mortgages) sellable because the bankers told the institutional investors - "hey, no need to worry about risk. I'll sell you a CDS with the CDO and if the mortgages default - the CDS pays you for your loss! In other words you can't LOSE!" .... well that's how it was SUPPOSED TO WORK.

The sale of CDOs with subprime mortgages really took off AFTER CDSs BECAME AVAILABLE. look at the charts. The sales started up after 2000, but they really took off in 2004 and later. The demand for subprime mortgages was driven because CDSs made CDOs composed of subprime mortgages MUCH MORE ATTRACTIVE TO INSTITUTIONAL INVESTORS.

But even with thes derivatives - the crash in Housing and Credit market STILL MIGHT NOT HAVE HAPPENED HAD THE BUSH ADMINISTARATION NOT FOUGHT REGULATION OF PREDATORY LENDERS. in 2003 50 states attorneys General sought to rein in predatory lenders using consumer protection laws. The bush administration went to court and stopped them. see Predatory Lenders Partner in Crime - Eliot Spitzer.

Now, if the 50 States attorneys general had NOT been stopped in reining in Predatory lenders then low-doc, no-doc loans would have been brought to a stop and many sub-Prime loans would not have been made. If this had happened it would have taken a lot of hot air out of the housing market and their would have been many fewer worthless mortgages to package and sell to suckers. We just might have NOT had a Housing bust and no Banking system crisis.

So it 's not just a case of the Glass Steagal act being passed. That by itself didn't cause the Trickle Down disaster. And Clinton did not know and nobody in Congress knew the CFMA was slipped in as a rider to the must pass, 11,000 page, Omnibus Funding bill of 2000. It was Phil Gramms surprise. And it also took the Bush administration blocking of the states attorneys General from reinging in predatory lenders to pull of the TRICKLE DOWN - DEREGULATION DISASTER.



Phil Gramm, John McCain

[eomer]

18. No, of course it's not just Glass-Steagall being repealed.

It is corruption through and through.

Glass-Steagall being repealed is just one glaring example out of many.

[Bill USA]

19. even this blatant 'hit-piece' doesn't accuse anyone of corruption.

Nowhere in the Scheer piece does he allege corruption.

Now, Larry Summers is a first class ass, who fully subscribes to the notion that those of 'superior' intellect (such as himself, of course, and Wall street financiers) are capable of ruling the world with almost perfect efficiency. He believes that he and others of 'superior intellect' can in the financial sector at least eliminate risk by clever use of derivatives.

The Scheer is guilty of major simplifications and distortions of what happened in the 1990's. IF you read my comment you know what I am talking about. Scheer says "Summers knows full well that the passage of the repeal of Glass-Steagall was pushed initially by Citigroup" ... this is bullshit. As I said in my comment, many people were concerned in the 90s about Wall Street losing its competitive edge to Japanese banks (which were combining and becoming huge - and able to offer efficiencies due to scale smaller Wall Street banks could not) and to the London stock exchange which was moving more rapidly than we were into electronic trading and use of derivatives. The consideration to remove the barrier between investment banks and insurance and investment banking was not done to please Citibank.