TPMCafe: "Republicans and the Credit Crisis" for Dummies

[flpoljunkie]

Barack Obama is right. "Washington and Wall Street were not minding the store."

This seemingly innocuous power point slide from the Securities and Exchange Commission (SEC) was used in June of 2004 to explain to market participants a new ruling on how broker dealers could compute their "net capital". Instead of the previous fixed limits on leverage of 10:1, broker dealers like Lehman Brothers could use their own "internal models" to determine how much leverage they could put on their capital. As we saw with the crash of Bear Stearns and now Lehman Bros., both firms were leveraged more than 30:1.

When you combine this ridiculous willingness to let broker dealers determine their own leverage with the decision three years later to alter the short selling rules to make it easier to short a stock, you have a recipe for financial chaos. These are both Bush administration SEC moves. They stem from a idealogical hatred of regulation. They cannot be blamed on Democrats. This needs to be stated clearly by Obama and Biden.

http://tpmcafe.talkingpointsmemo.com/2008/09/14/republicans_and_the_credit_cri/

[n2doc]

1. But are the American People smart enough to understand?

This has to be put in very simple terms. Bushco let the investment world run wild so that a short term unsustainable profit burst could be generated. Probably the best thing would be to overly a bunch of the newspaper quotes about billion dollar bonuses for these guys with trillion dollar debts they generated by their actions.

[flpoljunkie]

2. "Washington and Wall Street were not minding the store" seems pretty simple to me.

Although Obama might ad, "Bush's SEC"--but most folks probably wouldn't know what agency that was.

[lurky]

3. If it's framed right.

Stay away from the technical details, and focus on the nudge-nudge-wink-wink relationship.

[liberalla]

4. OMG - both firms were leveraged more than 30:1.

Wow.