“Sold Out: How Wall Street and Washington Betrayed America”
$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 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.
Financial Sector Political Money and 3000 Lobbyists Dictated Washington Policy
During the period 1998-2008:
- Commercial banks spent more than $154 million on campaign contributions, while investing $363 million in officially registered lobbying:
- Accounting firms spent $68 million on campaign contributions and $115 million on lobbying;
- Insurance companies donated more than $218 million and spent more than $1.1 billion on lobbying;
- Securities firms invested more than $504 million in campaign contributions, and an additional $576 million in lobbying. Included in this total: private equity firms contributed $56 million to federal candidates and spent $33 million on lobbying; and hedge funds spent $32 million on campaign contributions (about half in the 2008 election cycle).
The betrayal was bipartisan: about 55 percent of the political donations went to Republicans and 45 percent to Democrats, primarily reflecting the balance of power over the decade. Democrats took just more than half of the financial sector’s 2008 election cycle contributions.
The financial sector buttressed its political strength by placing Wall Street expatriates in top regulatory positions, including the post of Treasury Secretary held by two former Goldman Sachs chairs, Robert Rubin and Henry Paulson.
Financial firms employed a legion of lobbyists, maintaining nearly 3,000 separate lobbyists in 2007 alone.
These companies drew heavily from government in choosing their lobbyists. Surveying 20 leading financial firms, "Sold Out" finds 142 of the lobbyists they employed from 1998-2008 were previously high-ranking officials or employees in the Executive Branch or Congress.
Good post – very concise outline of rampant fraud and corruption.
Looks like big money owns and controls our government and our intelligence gathering agencies:
— On February
26, 2009, WMR reported on a major date that may bear
great significance on the collapses, bailouts, and investigations of a
number of major international firms tied to CIA covert activities.
WMR reported that on May 5, 2006, just three days prior
to Dusty Foggos resignation as the CIAs executive director, CIA Director
Porter Goss resigned. On the same day that Goss resigned, President
George W. Bush signed an order exempting publicly
traded companies from accounting and disclosure procedures, required under
the 1934 Securities Exchange Act, for national intelligence reasons.
Then-Director of National Intelligence John Negroponte was delegated the
authority to exempt companies from compliance with the SEC (Securities and
Exchange Commission) law. (See Online Journal reprint.)
What Bush did with one stroke of a pen was to exempt
companies like Stanford Financial Group, Bernard L. Madoff Investment
Securities LLC, American International Group (AIG), and other companies linked
to U.S., and, in the case of Madoff, Israeli, covert intelligence activities
from normal oversight and regulation by the SEC. The director of National
Intelligence (DNI), then John Negroponte, no stranger to the world of
subterranean intelligence operations, was empowered to exempt CIA front
companies from SEC oversight.
It is not known whether President Obamas DNI,
Dennis Blair, retains this authority, but Congress should start asking about
the Bush order and whether it remains in effect. And if the Senate and House
Intelligence Committees insist on keeping any discussions about CIA front
companies and slush funds behind closed doors, the committees responsible for
banking and securities oversight should stand their ground and reject any
interference, based on the old canard of national security, that may be
offered up by the two dubious Democrats who chair the two intelligence
It can be expected that the first to obstruct an
investigation of CIA front companies and slush funds will be Senator
Dianne Feinstein (D-CA), who has a huge conflict-of-interest with her
investment banker husband, Richard Blum, whose companies — CB Richard Ellis,
Newbridge Capital, and Blum Capital — are linked to various Asian operations,
some of which may have crossed paths with the intelligence activities of AIG,
especially in China, Singapore, Hong Kong, and in two nations for whom Blum
serves as honorary consul in San Francisco — Nepal and Mongolia. Blum was also
an investor in URS Corporation, which bought EG&G, a top intelligence
contractor, from The Carlyle Group. Carlyle has close business links to
the granddaddy of all CIA slush fund activities, George H. W. Poppy
Bush. Blum is also the founder and chairman of the American Himalayan
Foundation. The CIA has a sordid history of covert operations in the Himalayas,
particularly in Tibet and Nepal and, to a lesser extent, in Sikkim, Arunachal
Pradesh, Ladakh, Kashmir, and Bhutan. WMR has previously reported on the
presence of CIA front companies in the aviation business in Nepal and their
connections to gold smuggling operations.
The links between the CIA and private businesses were at the
heart of the October Surprise, the Iran-Contra scandal, the Savings & Loan
debacle, the collapse of the Bank of Credit and Commerce International (BCCI)
and Enron, and now the fall of the Stanford Financial Group and the financial
woes of AIG. The late Senator Pat Moynihan (D-NY) introduced legislation in
1991 and 1995 to abolish the CIA and transfer its functions to
the Department of State. That legislation should again be introduced. It
is time for the CIA to be consigned to the archival dustbins, along with
the Interstate Commerce Commission, the Civil Aeronautics Board, and the War
The American people have been subsidizing fraud through the
covert operations of the CIA and the American people have been played for
suckers by a cartoon-sounding collection of neer-do-wells with names like
Buzzy, Scooter, Dusty, Cookie, Duke, Nine Fingers, and last, but not least,
Sounds like conspiracy stuff to me.
What I always wonder now is how we never saw all this before, ya know? I guess it was the distractions. Or maybe the habit of distractions. I for one haven’t watched tv regularly or read a mainstream newspaper or magazine in many, many years, but but I guess still assumed all was going on swimmingly, including the nasty fights and accusations amongst countries. I suppose many of us so inclined simply tried to put all the mechanications out of our minds?