Wow! Last week will surely go down in the economic record books. According to the New York Times today, a group of major banks is pooling $7 billion each to offset crises similar to the Lehman Brothers expected bankruptcy, indicating that,"Washington officials and Wall Street have grave concerns about future losses." The U.S. Treasury and the Federal Reserve appear to be taking a harder line and temporarily relaxing some regulations at the same time. The Fed will accept more high risk collateral, "potentially putting more taxpayer money at risk." The Federal Reserve has loosened the emergency loan standards for Wall street investment banks. In a stunning related story to that of the fall of Lehman Brothers, Merrill Lynch has agreed to be purchased by Bank of America.
The question on many lips is, where were the regulators? The answer is "lais·sez faire n." Welcome to the wonderful world of rule by corporatocracy, begun by Ronald Reagan's era of deregulation decades ago. What disappeared more recently under the Bush administration was the bedrock of ethics and plain common sense. According to About.com., laissez faire means:
An economic theory from the 18th century that is strongly opposed to any government intervention in business affairs. Sometimes referred to as "let it be economics."
People who support a laissez faire system are against minimum wages, duties, and any other trade restrictions. Laissez faire is French for "leave alone."
- An economic doctrine that opposes governmental regulation of or interference in commerce beyond the minimum necessary for a free-enterprise system to operate according to its own economic laws.
Where was the Department of Justice hiding for all these years? For a while it was headed by Bush crony Alberto Gonzales, who was busy helping our current president expand his unitary presidency. Meanwhile nobody was watching the store. For example, an investigation by Paul Kiel from ProPublica was published on 9/8/08, with this headline: "DoJ: Credit Suisse Brokers Lied About Subprime Securities." To quote (author's links):
In one case, according to an SEC complaint against the pair also filed last week, they used $20 million of a client's money to buy a security backed by mobile home loans. But in an e-mail to his client, Bulter changed the name of the security from "Greenpoint Credit" to "Greenpoint Student Assistance." . . .
This is the second criminal case on Wall Street involving the subprime meltdown. Earlier this summer, the Justice Department filed its first major indictment, accusing two Bear Stearns hedge fund managers of misleading investors. The FBI is currently investigating 22 corporations involved in the subprime mortgage industry, FBI spokesman Bill Carter said. The FBI hasn’t named them. (See our overview of subprime-related investigations.)
Ethics violations* were in abundance in the Bush administration where government regulation was an anathema. Investigative journalist from ProPublica, Paul Kiel wrote this on 9/10/08: "New Report Details Wide-Ranging Ethics Scandal at Interior Dept. Quote, "According to a series of reports sent to Congress today by the department's inspector general, Interior employees rigged oil contracts, took money as oil consultants, had sexual relationships with oil and gas company representatives, and engaged in other misconduct." The same story by Amanda on 9/11/08, was posted on AlterNet: "Bush Administration Officials Rewrote Ethics Rules to Accommodate Partying#." To quote:
According to the new Interior Department Inspector General (IG) report, nearly a third of the Denver Minerals Management Service’s 55-person office “received gifts and gratuities from oil and gas companies.” Several employees have tried to claim that they were unaware of federal ethics guidelines.
. . . RIK officials often bragged about the “RIK way of doing business,” which aimed to “be a part of industry.” In the summer of 2006, RIK employees wrote up a document titled, “Initiative to Clarify Guidance for RIK Interaction with Industry,” which would codify their “uniqueness.” In short, RIK officials wanted to rewrite the ethics rules to cover up their misdoings.
. . . In a statement today, House Speaker Nancy Pelosi (D-CA) criticized “how cozy the relationship between Big Oil and the Administration’s regulators have been,” which has “cheated the American taxpayer out of billions of dollars owed them by the oil companies.”
The ripple effect is being felt all over the country and will ultimately impact the upcoming presidential election, says Politico.com. You can bet that Senator McCain would continue with the cozy corporatocracy, despite any protestations to the contrary. Those of us who are a bit older remember McCain's involvement with the Charles Keating scandal that resulted in the government bail-out of the savings and loan industry. My belief is that Senator Obama will demand much more accountability. By Mike Allen, the opinion is headlined, "Bank meltdown wallops campaigns." To quote:
America’s banking instability could upend the final 50 days of the presidential campaign, with both candidates forced to confront a calamity that has gotten only glancing attention during the first 20 months of the race for the White House.
Red flags about the nation’s economic infrastructure have been popping up at least since the collapse in March of the investment bank Bear Stearns. But neither Sen. John McCain (R-Ariz.) nor Sen. Barack Obama (D-Ill.) has talked in detail about the potential consequences for voters and the government.
Until now, the crisis seemed like a confusing Wall Street story. That all ended with the fast-moving events of Sunday, which The New York Times called “one of the most extraordinary days in Wall Street’s history.” A CNBC special report on Sunday night called it “a complete realignment of Wall Street.”
A few senators are still plugging away trying to make things better. The news from The Raw Story (9/10/08) is that, "Sen. Feingold to hold hearing on 'Restoring the Rule of Law'#." Several planned witnesses include various experts, law professors, historians and advocates to provide input as to what remedial actions the next president and Congress should take. The hearing will be held September 16, so watch for it tomorrow. To quote:
Senator Russ Feingold (D-WI), Chairman of the Senate Judiciary Committee's Constitution Subcommittee, has announced a hearing on how to best prepare the next president to foster an environment of accountability and responsible use of power seen lacking in the years President Bush and Vice President Cheney have been in office.
Next week the Subcommittee will hear testimony from legal and historical experts on what actions the next president and Congress need to take in order to "repair the damage done by the Bush Administration to the rule of law." The purpose of the hearing is to give the next president the "full range" of proper guidance in restoring and maintaining checks and balances in areas such as wiretapping, interrogations, government secrecy, violations of privacy, detention policy, proper use of executive power and efforts to not mislead Congress.
The country will be watching and holding its breath that the Wall Street woes will not end in a complete meltdown of our financial system. Would that the regulators and ethics watchdogs had made appearances long ago when problems were apparent. It did not have to reach this level of crisis. Credit Republicans for this, as you are holding your breath -- and your nose.
Hat Tip/Key to regular contributors Jon-# and "betmo"-* for the marked links.
View my current slide show about the Bush years -- "Millennium" -- at the bottom of this column.
(Cross-posted at The Reaction.)
My “creativity and dreaming” post today is at Making Good Mondays.