What safeguards from the 1929 crash have been undone?

[TNDemo]

I have heard people say Bush has been busy undoing them but unsure just what.

[NMDemDist2]

1. my guess is

all of them

[FreakinDJ]

2. Reagan undid the Sherman Anti-Trust laws in the 80s

and the Ratpublican party has been whiteling away at the rest ever since

[ingac70]

3. The Glass-Stegall Act for one...

But Bill Clinton had a hand in that.

http://en.wikipedia.org/wiki/Glass-Steagall_Act

Only one Dem voted to undo it in the Senate.

[truedelphi]

4. Here's the Wiki paragraph on Glass Steagel that I found of interest

The repeal <of the Glass Steagal> enabled commercial lenders such as Citigroup, the largest U.S. bank by assets, to underwrite and trade instruments such as mortgage-backed securities and collateralized debt obligations and establish so-called structured investment vehicles, or SIVs, that bought those securities. Citigroup played a major part in the repeal. Then called Citicorp, the company merged with Travelers Insurance company the year before using loopholes in Glass-Steagall that allowed for temporary exemptions. With lobbying led by Roger Levy, the "finance, insurance and real estate industries together are regularly the largest campaign contributors and biggest spenders on lobbying of all business sectors . They laid out more than $200 million for lobbying in 1998, according to the Center for Responsive Politics..." These industries succeeded in their two decades long effort to repeal the act.<9>

[truedelphi]

6. Let's not forget the Banking Reform act of 1999, an Act so convoluted that

Banks can now tell consumers that their policy is X on day one of the week, and then tell them that the policy of the bank is Y by Friday.

And normally you could do a class action lawsuit - but that reform act is so convoluted that even public interest groups' attorneys have no idea where to look inside the act for whatever information they would need to fight the many wrongs.

[HamdenRice]

14. This had little effect. The repeal of Glass-Steagal was banking inside baseball

There is a misunderstanding floating around the blogosphere that the repeal of Glass Steagal played a role in the expansion of the mortgage backed securities market. It didn't.

What it did do was allow the banks that held and originated mortgages to underwrite the securitization and sale of those mortgages. Before the repeal of Glass Steagal, those banks would have gone to Wall Street and hired an investment bank to do the underwriting.

The mortgages would have been securitized anyway and the underwriting would have been done anyway.

The repeal of Glass Steagal was to allow banks like Citigroup to cut out the middle man and retain the very, very expensive underwriting fees that otherwise would have gone to investment banks.

[westerebus]

15. IMHO.

I disagree. This added to the de-regulation of the system. It allowed the banks to take larger risk by themselves, no middle man, without expanding over sight or explanation as to what they were up to, when or if any oversight appeared. It was very carefully crafted to allow just what the banking industry wanted. Stealing is only against the law if the law is on the books. They knew exactly what they were doing. Blurring the line until it does not exist.

[HamdenRice]

16. "without expanding over sight or explanation" -- can you explain how?

It seems to me that the regulatory structure for the issue of securities remained the same after Glass Steagal. The banks purchased investment banking divisions which did the underwriting. How would the fact that the issuer and underwriter are under the same corporate umbrella create less oversight? Because the issuance of the securities was still subject to registration and review by the SEC.

Investment banks/underwriters never were much of a force for over sight, because they are notorious for only getting paid if the security is issued no matter how trashy the security is. The three private entities involved in the issuance and underwriting of any security that forced disclosure are (1) the corporate law firm that represents the underwriter, (2) the corporate law firm that represents the issuer, and (3) the accounting firm. Of course, it's the SEC as public entity that enforces that disclosure, but these entities are the SEC's allies inside every securities issuance.

These three entities have unlimited liability if the disclosure to the SEC is wrong and turns out to cause investors to lose money. Moreover, they are partnerships, so the individual partners don't have limited liability, and can lose not only their jobs, their firms, their retirement investment in the firm, but also their personal assets.

That's why it was such a big deal that when Enron failed, it was their accountants, Arthur Anderson, who lost everything and were liquidated.

These three entities -- issuer's counsel, underwriter's counsel and accountants -- are the three "doctor no's" of any security issuance, and force the issuer and underwriter to disclose everything to the SEC.

The villain of the mortgage backed securities scandal is, in fact, the Bush era SEC, which failed for force disclosure.

[truedelphi]

17. Who was it here on DU that posted an article about

Legislation that was being pushed by the SEC just some six or eight months ago - legislation that basically said that ONLY the SEC would look out for wrong doing on Wall Street, and that no other laws would be applicable to Wall Street interests?

I never followed the story to see if that legislation was indeed passed. Nor do I remember the name of the bill.

[westerebus]

24. Probable cause.

What the banks had on the books in terms of mortgage backed securities was not disclosed to regulators until the housing market tanked.As far as I know. Were the regulators looking? No, they were waiting for the accountants and counsel to report to them. As the bank's leveraged themselves beyond a reasonable risk by lending money they borrowed using junk as collateral, who was reporting to the SEC regulators? The better question is what were they reporting? I don't hear any prosecutor calling for the heads of the accounting firms or all that legal staff a la En-ron. All the time the rating firms were over rating the quality of the junk by a gross amount of wishful thinking; not a whisper from the banks on disclosure. Not a hint from the underwriters either. The corporate counsels and accountants had to have had at least a passing knowledge of the contents of the corporate balance sheet or they were paid to keep their mouth's shut. My lawyer would tell me, keep your mouth shut, if something needs to be disputed,defended,denied,or deferred; that's my job, that's what you pay me for.
My thinking is along the lines used by the FBI and CIA and the "firewall" that prevented them from disclosing domestic activity of known terrorists. Both had knowledge and both claimed to be following the letter and intent of the law based on their understanding. Neither accepted responsibility. Both reported to their respective regulators in compliance to the law. I think the term is with in the scope of their duties. If the underwriter agrees to the aaa rating on a mortgage back security and missed the TV infomercial on low interest, no background check, no employment check, adjustable rate mortgages provided by the corporation whose letter head appeared in the disclosure of the principles, then I'm missing something. Just like the SEC, the FBI, the CIA. And for sure on Bush co's watch.

[Dover]

28. About deregulation

The U.S. banking industry has experienced tremendous deregulation, beginning in the early 1980s. The major impact of this deregulation was purported to be the consolidation of the banking industry, through the elimination of efficient and financially unsound banks. However, the neo-classical economic assumption upon which this belief is based has not been tested. This paper tests this assumption by examining the causal factors involved in a bank’s being an acquiring bank in a merger and the causal factors involved in a bank’s being a target bank in a merger in a sample of over 3000 banks spanning the years 1976-1998. Using a combination of neo-institutional theory and resource dependence theory, this analysis suggests that banks facing internal and external sources of uncertainty are likely to be involved in merger, which was legitimated through regulation changes. Both types of merger have a similar causal structure, with the exception of size, such that large banks are more likely to be an acquiring bank and small banks are more likely to be a target bank.

http://www.allacademic.com/meta/p_mla_apa_research_citation/1/0/9/7/1/p109710_index.html

[mrJJ]

5. Take a look see at the vote

McCain & the GOP Screwed America

Gramm-Leach-Bliley Financial Services Modernization Act.

53 Republican Senators plus one Democrat - AYE

44 Democrats no Republicans - NAY

U.S. Senate Roll Call Votes 106th Congress - 1st Session

as compiled through Senate LIS by the Senate Bill Clerk under the direction of the Secretary of the Senate

http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=106&session=1&vote=00105

[gateley]

8. Boy, that was strictly split down party lines.

Except for the Dem jerk Hollings (D-SC).

We need more in the Senate! Especially since we're losing Obama and Biden!!

[happyslug]

19. Watch out for Senate Rules, that is why Hollings voted the way he did.

The US Senate has a rule that the only people who can bring back up a bill for a new Vote that has already been voted on, must be on the prevailing side. i.e. must have voted with the Majority. When you have a straight Party line vote, the losing party tends to have one of its members vote with the Majority so that if the losing party can convince some of the winning party that the law was wrong, they can have that member ask for a new Vote. You do NOT want the opposing party to know who switch their vote so you do NOT have those vote switchers ask for the revote, but have your loyal party Senator who voted with the Majority to exercise his "Right" for a new Vote.

I go into this so that people understand that when you have one person from the losing party voting with the Winning side, it is for the losing party to retain the ability to redo the vote. Both parties do this on a regular basis so when you see one Senator from either party voting opposite his party this is why (Lieberman and other Conservative Democrats in the past are an exception to rule, but Hollings in this case seems to have been the the Democrat appointed by the party to perform this function in this particular vote).

[slipslidingaway]

21. Thanks for that note. n/t

[happyslug]

22. It is only a US Senate Rule, but one that is followed

Unlike the House, which has strict rules on how to vote and who can call for a vote and when, the Senate tries to operate as an open club, with every member certain rights to call up any bills, even bills that have been voted on but not yet sent to the President (For his signature) or the House (To vote on the bill itself). Thus this rule that any member on a prevailing vote can all up that bill for a re-vote unless it has passed to the President for his signature.

This is covered by Rule 13 of the Senate Rules:

1. When a question has been decided by the Senate, any Senator voting with the prevailing side or who has not voted may, on the same day or on either of the next two days of actual session thereafter, move a reconsideration; and if the Senate shall refuse to reconsider such a motion entered, or if such a motion is withdrawn by leave of the Senate, or if upon reconsideration the Senate shall affirm its first decision, no further motion to reconsider shall be in order unless by unanimous consent. Every motion to reconsider shall be decided by a majority vote, and may be laid on the table without affecting the question in reference to which the same is made, which shall be a final disposition of the motion.

2. When a bill, resolution, report, amendment, order, or message, upon which a vote has been taken, shall have gone out of the possession of the Senate and been communicated to the House of Representatives, the motion to reconsider shall be accompanied by a motion to request the House to return the same; which last motion shall be acted upon immediately, and without debate, and if determined in the negative shall be a final disposition of the motion to reconsider.

http://rules.senate.gov/senaterules/rule13.php

Complete Senate Rules:
http://rules.senate.gov/senaterules/

[slipslidingaway]

23. Thanks again for the additional note on the rules. I was wondering

why Hollings was the only yes vote, especially after reading some of his speeches on the SS Trust Fund.

Also I just posted the final vote, only 8 no votes.

http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=106&session=1&vote=00354

NAYs ---8
Boxer (D-CA)
Bryan (D-NV)
Dorgan (D-ND)
Feingold (D-WI)
Harkin (D-IA)
Mikulski (D-MD)
Shelby (R-AL)
Wellstone (D-MN)

[slipslidingaway]

20. Links to votes on final passage of the bill...

http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=106&session=1&vote=00354

NAYs ---8

Boxer (D-CA)
Bryan (D-NV)
Dorgan (D-ND)
Feingold (D-WI)
Harkin (D-IA)
Mikulski (D-MD)
Shelby (R-AL)
Wellstone (D-MN)


http://clerk.house.gov/evs/1999/roll570.xml


---- NAYS 57 ---

Baldwin
Barrett (WI)
Barton
Brady (PA)
Campbell
Capuano
Clay
Condit
Conyers
Costello
Coyne
Davis (IL)
DeFazio
DeLauro
Dingell
Dixon
Edwards
Evans
Fattah
Filner
Frank (MA)
Gejdenson
Gutierrez
Hastings (FL)
Hefley
Hinchey
Inslee
Jackson (IL)
Kaptur
Kildee
Kucinich
Lee
Lewis (GA)
Lipinski
Luther
Markey
McDermott
McKinney
Meek (FL)
Mica
Miller, George
Obey
Phelps
Rivers
Rodriguez
Roybal-Allard
Rush
Sanders
Sanford
Schakowsky
Serrano
Taylor (MS)
Thurman
Tierney
Waters
Waxman
Woolsey

[Dover]

30. G-S Act and more

http://books.google.com/books?id=jslsIEZSvh0C&pg=PA5&lpg=PA5&dq=risks+of+bank+consolidation,+deregulation&source=web&ots=VJrLdmdWHI&sig=5AAe0BnIjMxph2F3AFxoa9P_YBs&hl=en&sa=X&oi=book_result&resnum=9&ct=result#PPA6,M1

[ayeshahaqqiqa]

7. Don't know--but I've always followed my Great-Grandma's advice

Don't trust Wall Street. They are crooks out to steal your money.

She learned in '29. I've learned from her. Have no direct stock investments.

[ben_meyers]

9. Mother Jones "It's the Deregulation Stupid"

It's the Deregulation, Stupid

Commentary: Democrats from Carter to Clinton helped roll back the government's regulatory power, but as the economic crisis deepens, "regulation" is no longer such a dirty word.

By James Ridgeway

March 28, 2008


Speaking at Cooper Union in New York City on Thursday, Barack Obama went where few Democrats have dared to go in the past quarter-century: He made a case for more regulation. As part of a speech on his economic platform, Obama depicted the current economic crisis as a consequences of deregulation in the financial sector. "Our free market was never meant to be a free license to take whatever you can get, however you can get it," he said. "Unfortunately, instead of establishing a 21st century regulatory framework, we simply dismantled the old one—aided by a legal but corrupt bargain in which campaign money all too often shaped policy and watered down oversight."

http://www.motherjones.com/commentary/columns/2008/03/deregulation-economic-crisis.html

Unfortunately it appears to be a bi-partisan cluster fark, plenty of blame to go around. Whoever gets into the White House next year better be prepared for a shit storm. May Dog have mercy on their souls.

[gravity]

10. Safeguards are about the same, banks have just gotten smarter to get around them

The nature of financial markets evolve, and the government fails to keep up. Bush is Laissez-faire, so the government figured the market will solve this crisis

[nadinbrzezinski]

11. Plenty and to be fair it started under Clinton

But almost all of them are gone

[upi402]

13. Clinton, I always say he was the best Republican EVER! n/t

[whistle]

12. Most if not all of them

http://www.larouchepac.com/files/pdfs/080911_tantamount_treason.pdf

[truedelphi]

18. Eliot Spitzer understood the Wall St crash of 1929, & he was very unhappy about

The mood of Wall Street, which has now been buying on margins (in derivatives, and the housing markets, etc) just as occurred with the good ol day of the Roaring Twenties.

So Spitzer had to be gotten rid of. They used Homeland Security to keep tabs on him and traced his expenditures of offshore monies to the call girl profession. It's a shame that he made it so easy for them.

[upi402]

25. Probably the reason why so many "Dems" act like Repukes

But it pales when compared to the twisted freaks that are Republicans and their delusional, farm-animal-frightening minions.
Thanks to Spitz! Yep, he'd follow his ding-ding over a cliff. I'm shocked, SHOCKED I tell you!

[truedelphi]

26. Also back in the spring of

2006 or 2007 we took the dollar off the M3 index.

Now harder than ever to find out how much money is being printed, etc.

[Ah Xoc Kin]

27. Glass Steagall?

Did anyone mention that in 1999, Clinton signed
a bill repealing the Glass Steagall act of 1933. He allowed
commercial and investment banks to merge, letting
otherwise safe banks to wander into dangerous
and risky territory. The bill to repeal was sponsored by
Repub Phil Gramm.

[Ninga]

31. Tricky vote on Clinton's watch in a Rep majority Senate that could have overridden his

veto.

So the question is.....why didn't DLC'er Clinton take the bully pulpit in hand and make a lot of noise with a veto vote?

[Dover]

29. History of Banking Deregulations

http://www.scribd.com/doc/2012677/U-S-Bank-Deregulation-in-Historical-Perspective

[masterpowersaw]

32. we have to be careful

We need to be careful about this whole glass-steagal act. The Senate vote was 90-8 and Biden voted in favor of it, along with Schumer.

Here is what he said that day:

"I first want to thank Chairman Gramm and Senator Sarbanes, Chairman Leach, Representative LaFalce, and all of my colleagues who worked so long and hard on this legislation," Mr. Schumer began, "Mr. President, this is a historic moment. We've been working towards it for 18 years ... the future of America's dominance as the financial center of the world is at stake. This bill is vital for the future of our country...Mr. Schumer went on, "I need not tell the Senate how important this bill has been to the financial capital of the world, New York." He concluded, "And so, Mr. President, in conclusion, this is a historic day. It's a historic day for my state of New York, which I am proud to say is the financial capital of the world, and with this bill has a much greater likelihood of remaining...From Glass-Steagall to Gramm-Leach, from the Great Depression to the Golden Age, from isolationists to internationalists, from underdogs to champions, this bill, in my opinion, Mr. President, is an American success story for our economy, for our financial institutions, for our communities and consumers and for my state of New York. And I was proud to have played a role with so many others in ensuring its passage." Ouch. I wonder if he regrets this now?? That is now wise.

Clinton said this as well: "President Clinton, in signing the law in November of 1999, issued a statement saying, "The Gramm-Leach-Bliley Act is a major achievement that will benefit American consumers, communities, and businesses of all sizes. I thank all of those individuals who played a role in the development and passage of this historic legislation....Mr. Clinton said back then that the law "will modernize our financial services laws, stimulating greater innovation and competition in the financial services industry. America's consumers, our communities, and the economy will reap the benefits of this Act." He said, "Financial services firms will be authorized to conduct a wide range of financial activities, allowing them freedom to innovate in the new economy....Noted Mr. Clinton: "The Act repeals provisions of the Glass-Steagall Act that, since the Great Depression, have restricted affiliations between banks and securities firms. It also amends the Bank Holding Company Act to remove restrictions on affiliations between banks and insurance companies. It grants banks significant new authority to conduct most newly authorized activities through financial subsidiaries."

I know McCain is an idiot, but didn't anyone tell Obama how many of our senators voted for this bill? Clinton said this week in a business week article that he does think law caused this problem as their were enough regulation still out there for securities and insurance. Somebody tell his wife as well who blamed the mess on Bush.

Can't wait to see BO and Biden kick those neo-cons butts in the debates. Obama/Biden 08!