We still have the two pieces of legislation on the books that allowed crazy deregulation of banks, and allowed the non-regulation of credit default swaps. When banks and financials put those two together, it made the bomb that went off in our collective faces the past year. Time to talk is over, it's time to act.
1999 - The Gramm-Leach-Bliley Act was passed repealing part of the Glass-Steagall Act,which was put in place after the Great Depression to keep banks from engaging in crazy speculation with their depositors' monies. It also prevented too much bank consolidation,so that no bank could be "too big to fail". Gramm-Leach-Bliley reversed those rules, allowing not only more bank mergers, but for banks to become directly involved in the stocks, bonds, and insurance.
2000 - Commodity Futures Modernization Act. This act greatly expanded the way futures could be traded, and most importantly, kept these new "investment vehicles" from being regulated. This act allowed the famous Enron loophole,exempting energy trading from regulation. Enron ran up an $11 Billion bill to the state of California alone using this new "regulation". But, we couldn't be bothered to think there was a problem with lack of regulation at this point. Enron became a smoking hole, but nobody thought regulating financials was a good idea, at least nobody in the Bush administration. Oh yeah, this one too was penned by Phil Gramm, now of UBS. The value of credit default swaps in the US before this act was practically negligible.
The Depression was fueled by unregulated banks making wild bets with depositor money and ridiculous mergers. We learned, said never again, and passed Glass-Stegall. The S&L crisis came about because S&L's were allowed to compete with banks without bank regulations, including merger restrictions and investing in bizarre instruments with their depositor money. We learned, the S&L crisis was dealt with by the Resolution Trust Company, and we vowed never to make that mistake again.
When the Gramm-Leach-Bliley Act was combined with the Commodities Futures Modernization Act, you had banks that could merge however they wished, offer all kinds of services that weren't "banking" any more - insurance, investments, etc, and could also invest in wild instruments in a completely unregulated environment using - you guessed it - depositor money. If you don't know what credit default swaps are by now, I am not going to go into it other that giving a simple example of the scope.
If the amount of risky mortgages in the US is $5 trillion, banks and other entities, such as AIG, have "bets" that those mortgages will default, even if they don't own the mortgages. They called it insurance at AIG so they wouldn't have to have required capital reserves of investments. The value of these "bets" ranges from estimates of $45 trillion to $70 trillion. That's right, $45 Trillion of speculation on what will happen to $5 trillion in mortgages. So incredibly risky are these investments that nobody still wants to stand up and put them under a microscope, for fear that the American public would burn down the banks literally and figuratively. But, this isn't another article about how stupid credit default swaps are. This is a simple question:
WHY IN THE HELL ISN'T THERE LEGISLATION IN FRONT OF CONGRESS RIGHT THIS MINUTE TO REPEAL GRAMM-LEACH-BLILEY AND THE COMMODITIES FUTURES MODERNIZATION ACT??????? THE BEHAVIOR IS STILL ONGOING. MAKE BANKS BE BANKS, REGULATE ALL INVESTMENTS.
I don't think you can go backwards and punitively correct past behavior, we have to move forward. As they say where I grew up in Eastern NC, you can't put the shit back in the donkey. But we sure as hell can put the regulations back on these greedy bastards who have proved, yet again, that the lessons we vowed never again on then turned right around and did it again, can be put into place. Find Susan Powder - Stop the Madness!
Barney Frank, get me some goddamm re-regulation proposed right now. Stop making all your bold statements about things you goddamm well knew were happening for 8 years and fix it. Stop talking and fix it. Now.
And GOP, you pitiful collection of bobble-heads. If you want to show some real leadership, why don't you propose rolling back these two pieces of legislation? Oh wait, that would be legislation. See memo from John Boner. Yeah, I know that's not how he spells it, but he should.