12 Key Policy Decisions That Led To The Financial Cataclysm
Whether a loss due to insurance abuse, or the loss of a loved one in a runaway Toyota, or a small town business owner impeded by a status quo, geared to serve monopolies and speculators, working families have been bearing the brunt of the symptoms of a system that has forgotten, there are real people connected to the numbers.
The first time I came across insurance abuse and a “pre-existing condition” was in 1987. A great small town business and great small town businessman setting a standard for community, for family and for his profession. This businessman and family-man suffered an aneurysm, yet thanks to the new “pre-existing condition” loop-hole the business went bankrupt under medical debt pressure and he died trying to survive financially, ineligible for insurance. This by itself indelibly tagging the capitalist “vision” of free-market fundamentalism as an utter failure in my opinion, 23 years ago.
Still there are idiots in Washington saying start over? WTF!?
2005 was the first time I linked a RoR (Run of Road), fatality to a new Toyota. The victim was on a dry road with no traffic, that she had driven every day for years. She was speeding and over corrected, colliding with a wall on the inside of the turn throwing her out the driver side window into the opposite lane. Whether or not this accident was due to a systematic design flaw by Toyota I can’t say, but I have to wonder, in a system set up to give regulatory responsibility to the regulated (small government) how many others have lost a loved one or been injured in an inadequately explained, speeding RoR Toyota fatality? How much responsibility should the career politicians in Washington bear for the systematic failure of our government to protect our interest, and how much should we bear ourselves.
Right now there are still speculators betting that Greece – considered the cradle of western civilization and democracy – will fail, giving a play by play of the impending fiscal crisis, profiting from fear of a collapse. This is a clear example of runaway global capitalism unable to resist attacking a fellow democracy for profit. I don’t think the speculators playing the tragedy market even give the individual lives tied to the numbers a second thought. A speculator willing to stand up for democracy and social sustainability would not be a speculator. Its the peoples responsibility to come together for their common interest, but people across the globe have let their power of democratic solidarity atrophy.
We will soon get some indication in pending health insurance reform and financial regulation, whether our not anything has really changed in the last year.
While in one breath the GOP says it has learned its lesson, with the next breath they defy democratic rule. Not for the sake of protecting a true minority but for the sake of protecting the over-powered financial interest comprising the status quo.
These are only a few examples from a fiscal ruble pile that privatization has made of America. There are thousands and thousands more. This is our productivity being used to undermine or own stability and security.
Between 1998-2008 Wall Street; commercial banks, insurance monopolies and real estate, made 1.725 billion in campaign contributions and 3.4 billion on lobbyist. There were a dozen distinct de-regulatory ambitions of the financial sector that combined, led to the crisis. From a report by Wall Street Watch from one year ago that details how Washington systematically sold out to wall Street, washing out the foundation of our democratic system designed to provide sustainability for everyone not just Wall Street profit:
“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 consequences:
- 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 massive speculation.
- 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.
- Federal bank regulators claimed the power to supersede state consumer protection laws that could have diminished predatory lending and other abusive practices.
- Federal rules prevent victims of abusive loans from suing firms that bought their loans from the banks that issued the original loan.
- Fannie Mae and Freddie Mac expanded beyond their traditional scope of business and entered the subprime market, ultimately costing taxpayers hundreds of billions of dollars.
- The abandonment of antitrust and related regulatory principles enabled the creation of too-big-to-fail megabanks, which engaged in much riskier practices than smaller banks.
- Beset by conflicts of interest, private credit rating companies incorrectly assessed the quality of mortgage-backed securities; a 2006 law handcuffed the SEC from properly regulating the firms.
Our overarching goal should always be standardizing the use democratic solidarity by regular people to advocate for their best interest. This is not a 2010 battle this is a permanent battle, to hold back the constant regressive pressure of organized greed on the sustainability of a democratic society.