posted on Mar, 8 2009 @ 04:33 AM
$5 BILLION IN POLITICAL CONTRIBUTIONS BOUGHT WALL STREET FREEDOM FROM REGULATION, RESTRAINT, REPORT FINDS
Steps to Financial Cataclysm Paved with Industry Dollars
March 4 - The financial sector invested more than $5 billion in political influence purchasing in Washington over the past decade, with as many as
3,000 lobbyists winning deregulation and other policy decisions that led directly to the current financial collapse, according to a 231-page report
issued today by Essential Information and the Consumer Education Foundation.
The report, "Sold Out: How Wall Street and Washington Betrayed America," shows that, from 1998-2008, Wall Street investment firms, commercial banks,
hedge funds, real estate companies and insurance conglomerates made $1.725 billion in political contributions and spent another $3.4 billion on
lobbyists, a financial juggernaut aimed at undercutting federal regulation. Nearly 3,000 officially registered federal lobbyists worked for the
industry in 2007 alone. The report documents a dozen distinct deregulatory moves that, together, led to the financial meltdown. These include
prohibitions on regulating financial derivatives; the repeal of regulatory barriers between commercial banks and investment banks; a voluntary
regulation scheme for big investment banks; and federal refusal to act to stop predatory subprime lending.
"The report details, step-by-step, how Washington systematically sold out to Wall Street," says Harvey Rosenfield, president of the Consumer
Education Foundation, a California-based non-profit organization. "Depression-era programs that would have prevented the financial meltdown that
began last year were dismantled, and the warnings of those who foresaw disaster were drowned in an ocean of political money. Americans were betrayed,
and we are paying a high price -- trillions of dollars -- for that betrayal."
"Congress and the Executive Branch," says Robert Weissman of Essential Information and the lead author of the report, "responded to the legal
bribes from the financial sector, rolling back common-sense standards, barring honest regulators from issuing rules to address emerging problems and
trashing enforcement efforts. The progressive erosion of regulatory restraining walls led to a flood of bad loans, and a tsunami of bad bets based on
those bad loans. Now, there is wreckage across the financial landscape."
12 Key Policy Decisions Led to Cataclysm
Financial deregulation led directly to the current economic meltdown. For the last three decades, government regulators, Congress and the executive
branch, on a bipartisan basis, steadily eroded the regulatory system that restrained the financial sector from acting on its own worst tendencies.
"Sold Out" details a dozen key steps to financial meltdown, revealing how industry pressure led to these deregulatory moves and their
1. In 1999, Congress repealed the Glass-Steagall Act, which had prohibited the merger of commercial banking and investment banking.
Regulatory rules permitted off-balance sheet accounting -- tricks that enabled banks to hide their liabilities.
The Clinton administration blocked the Commodity Futures Trading Commission from regulating financial derivatives -- which became the basis for
Congress in 2000 prohibited regulation of financial derivatives when it passed the Commodity Futures Modernization Act.
The Securities and Exchange Commission in 2004 adopted a voluntary regulation scheme for investment banks that enabled them to incur much higher
levels of debt.
Rules adopted by global regulators at the behest of the financial industry would enable commercial banks to determine their own capital reserve
requirements, based on their internal "risk-assessment models."
Federal regulators refused to block widespread predatory lending practices earlier in this decade, failing to either issue appropriate regulations or
even enforce existing ones.