In the first half of 2009, when Senators Dick Durbin and Bernie Sanders, along with House Agriculture Committee Chair Colin Peterson, all told us of how the "
banks run the place," as they referred to the complete
regulatory capture of our legislative branch by Wall Street, had we known about the true extent of the matter at the time, I think the public would've been a lot more vociferous in response to those revelations.
Then again, given what we've since learned relating to the sheer onslaught of facts concerning the now-obvious fraud that has run rampant throughout our nation's financial services industry over the past decade, maybe we would still be in the place we're in, today.
You see, based upon today's reminder in the New York Times (SEE: "Lawmakers Regulate Banks, Then Flock to Them," by Eric Lichtblau), the reality is that more than 70 former members of our Congress and Senate have been on the payroll of our nation's financial services industry in the past 15 months, alone.
That's a pretty damning statistic.
As you'll see, below, Lichtblau tells us to add another 56 key financial services legislative committee staffers to the Wall Street lobbyist's roster; and, at that point, many folks really don't need to read much further to get the gist of this diary.
But, I'm going to go for it (or, should I say George Washington will "go for it" for me), and I'll take the "piling on" penalty and lose the proverbial 15 yards, and also remind everyone reading this that the "nobody-could've-known" mantra now popularized by everyone--running for cover like a bunch of cockroaches in a dark room after the light's turned on--from Tim Geithner and Ben Bernanke, to Robert Rubin (and everyone else on down the nation's past and present economic management food chain) et al, is nothing more than a bunch of bullsh*t, too.
As demonstrated, below, they all knew what was going on at the time; just like they know what's going on right now.
It's business as usual. Truly and irrefutably.
Everyone who was anyone knew about the outright scams, on Wall Street, in the residential mortgage industry, and in investment and commercial banking throughout this country. Hell, I own and run a small software company that processes consumer credit applications for Main Street retailers these days; but, around 2005-2006, we dabbled (doing the same thing) in the mortgage industry, and it was clear at the time that matters were downright twisted, pervasively throughout the industry, even to us! (We only processed mortgages for a few months, and since everyone and their cousin had been rushing to get in on the upside-down action, we walked away from the sector as quickly as we had gotten into it...but, not before we clearly realized that something was very, very wrong with housing finance regulation, even then. And, we were just a small-time technology provider at the time, too.)
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Lawmakers Regulate Banks, Then Flock to Them
By ERIC LICHTBLAU
New York Times
April 14, 2010
WASHINGTON --
...as Congress takes on an overhaul of the system of regulating financial giants: Wall Street, perhaps more than any other industry, is bolstering its lobbying forces, and turning more and more to former lawmakers and Congressional staff members to lead the fight against stiff rules.
The revolving door is an oft-noticed phenomenon here, but in recent years, the migration from Congress to the financial services firms that are trying to stave off greater federal regulation has become more pronounced.
From anonymous midlevel workers to former House and Senate majority leaders, more than 125 former Congressional aides and lawmakers are now working for financial firms as part of a multibillion-dollar effort to shape, and often scale back, federal regulatory power, data shows. Indeed, some of the biggest players in Washington politics are lobbying now on the regulatory bills that are making their way through Congress...
Among others specifically mentioned in the article, you'll read how former Ohio Republican Congressman Michael Oxley (one of two co-authors of the Sarbanes-Oxley act of 2002, no less) received $40,000 in Q4 '09 as he lobbied on behalf of the NASDAQ's efforts to limit competitor's ownership of derivatives clearinghouses.
Former Louisiana Republican Congressman Richard Baker represents the biggest firms in the trillion dollar hedge fund industry.
And, on and on and on...
An analysis by Public Citizen found that at least 70 former members of Congress were lobbying for Wall Street and the financial services sector last year, including two former Senate majority leaders (Trent Lott and Bob Dole), two former House majority leaders (Richard A. Gephardt and Dick Armey) and a former House speaker (J. Dennis Hastert).
In addition to the lawmakers, data from the Center for Responsive Politics counted 56 former Congressional aides on the Senate or House banking committees who went on to use their expertise to lobby for the financial sector.
As the article further explains it, VISA, alone, hired 37 of them. Others high up on the list of those entities responsible for stuffing dollars in the pockets of our nation's former legislators (and their assistants) include: Goldman Sachs, Prudential, Citigroup and the American Bankers Association, "...according to the analysis from Public Citizen, an advocacy group that has pushed for tougher lobbying restrictions."
The article closes by explaining that "...former members of Congress and staff members were in high demand because they brought invaluable expertise and access on federal matters."
The going rate for staffers, Public Citizen's Craig Holman tells us is "...something like $300,000 to $600,000 a year, and for a member of Congress, it's anywhere from $1 million to $3 million."
So much for the old W.C. Fields punchline: "...I know what you are. I'm just trying to determine your price."
But, truth be told, it's not just about the 70 former members of the House and Senate that have been prostituting their services out to the highest bidders in the financial services industry...it extends all the way up to very top of our nation's economic management food chain.
As George Washington clearly explains it to us, if you read below, they're ALL lying. Period.
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(DIARIST'S NOTE: Naked Capitalism Publisher Yves Smith has granted diarist blanket permission [in writing] to reprint posts from her website, in their entirety.)
Guest Post: "Never Even a Whisper" at Fed's Open Market Committee Meetings
George Washington
Naked Capitalism
Tuesday, April 13, 2010
Washington's Blog
Ben Bernanke, William Dudley and Donald L Kohn are on the Fed's Open Market Committee (FOMC).
They are also on the board of directors of the Bank for International Settlements (BIS) - often called the "central banks' central bank". And Kohn is an alternate director for BIS.
Alan Greenspan, of course, was a BIS director for many years.
Dudley is also chairman of BIS' Committee on Payment and Settlement Systems. (Tim Geithner - previously on the FOMC - previously held that post).
So there is clearly quite a bit of overlap between the two groups.
In addition, BIS' chief economist - William White - and others within BIS - repeatedly warned the Federal Reserve and other central banks that they were setting the world economy up for a fall by blowing bubbles and then using "using gimmicks and palliatives" which "will only make things worse".
As Spiegel wrote last July:
White and his team of experts observed the real estate bubble developing in the United States. They criticized the increasingly impenetrable securitization business, vehemently pointed out the perils of risky loans and provided evidence of the lack of credibility of the rating agencies. In their view, the reason for the lack of restraint in the financial markets was that there was simply too much cheap money available on the market...
As far back as 2003, White implored central bankers to rethink their strategies, noting that instability in the financial markets had triggered inflation, the "villain" in the global economy...
In the restrained world of central bankers, it would have been difficult for White to express himself more clearly...
It was probably the biggest failure of the world's central bankers since the founding of the BIS in 1930. They knew everything and did nothing. Their gigantic machinery of analysis kept spitting out new scenarios of doom, but they might as well have been transmitted directly into space...In their report, the BIS experts derisively described the techniques of rating agencies like Moody's and Standard & Poor's as "relatively crude" and noted that "some caution is in order in relation to the reliability of the results."...
In January 2005, the BIS's Committee on the Global Financial System sounded the alarm once again, noting that the risks associated with structured financial products were not being "fully appreciated by market participants." Extreme market events, the experts argued, could "have unanticipated systemic consequences."
They also cautioned against putting too much faith in the rating agencies, which suffered from a fatal flaw. Because the rating agencies were being paid by the companies they rated, the committee argued, there was a risk that they might rate some companies too highly and be reluctant to lower the ratings of others that should have been downgraded.
These comments show that the central bankers knew exactly what was going on, a full two-and-a-half years before the big bang. All the ingredients of the looming disaster had been neatly laid out on the table in front of them: defective rating agencies, loans repackaged to the point of being unrecognizable, dubious practices of American mortgage lenders, the risks of low-interest policies. But no action was taken. Meanwhile, the Fed continued to raise interest rates in nothing more than tiny increments...
The Fed chairman was not even impressed by a letter the Mortgage Insurance Companies of America (MICA), a trade association of US mortgage providers, sent to the Fed on Sept. 23, 2005. In the letter, MICA warned that it was "very concerned" about some of the risky lending practices being applied in the US real estate market. The experts even speculated that the Fed might be operating on the basis of incorrect data. Despite a sharp increase in mortgages being approved for low-income borrowers, most banks were reporting to the Fed that they had not lowered their lending standards. According to a study MICA cited entitled "This Powder Keg Is Going to Blow," there was no secondary market for these "nuclear mortgages."...
William White and his Basel team were dumbstruck. The central bankers were simply ignoring their warnings. Didn't they understand what they were being told? Or was it that they simply didn't want to understand?
Yet, White said (h/t Edward Harrison) in a short, must-see talk last week that former long-time St. Louis Fed president William Poole told him that there was never even a whisper of these basic concepts at a single FOMC meeting.
Indeed, White says that - even today - the Federal Reserve is doing the same old thing, reading off of the same playbook that caused the Latin American crisis, the Asian meltdown, the Long Term Capital meltdown, and all of the other financial crises of the last couple of decades. And see this.
White, of course, argues for more accurate models which take into account real-world factors such as debt stocks, and include a time-frame longer than 2-year inflation targets or 4-year election cycles.
But as Simon Johnson has repeatedly pointed out, economics used to acknowledge that politics had an important affect on economic policy, but now the economics profession - as a whole - tries to pretend that it is strictly a mathematical and technical art form.
And as I documented last October, economists are trained to ignore - and central bankers and regulators rewarded to the extent that they ignore - the real world.
And we cannot improve our models and understandings of how to prevent another crisis unless the truth of what caused this crisis is openly discussed (under subpoena power); and see this. If the government's entire strategy remains to cover up the truth, then we won't have the chance.
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Can you handle these truths? I guess I'll know once I read your comments. Flame away.