Mind and Destiny

“I make no pretension to patriotism. So long as my voice can be heard ... I will hold up America to the lightning scorn of moral indignation. In doing this, I shall feel myself discharging the duty of a true patriot; for he is a lover of his country who rebukes and does not excuse its sins. It is righteousness that exalteth a nation while sin is a reproach to any people.”- Frederick Douglass

Location: Delhi, N.Y., United States

The author and his webmaster, summer of 1965.

Friday, May 05, 2017

Ten Years Later

In 1998, Citibank was allowed to merge with the insurance giant, Travelers, even though it was against the law.    

Billionaire Warren Buffett first noticed, that the “Gramm amendment” enabled the creation of a shadow banking system, which allowed the creation of financial “weapons of mass destruction.”  The Gramm amendment directly contributed to the 2008 mortgage foreclosure crisis, that resulted in the worst economic crisis since the Great Depression.

The Glass-Steagall Act had erected a wall between regulated Main Street banks and unregulated investment banks.  Without that wall, the stage was set for firms to merge until they were “too big to fail.”  Regulators allowed firms to hide risky investments off their books which meant they didn’t have to keep enough money on hand to cover possible losses.  Those practices were permitted by the Financial Accounting Standards Board in rules pushed for by bank executives.

In 2004, President George Bush’s Securities and Exchange Commission scrapped a 20 year old rule that made banks keep a certain amount of cash on hand to cover investment losses. 

That new rule was pushed by Henry Paulson, who eventually, became Bush’s treasury secretary.  In 2008, the $700 billion, Troubled Assets Relief Program (TARP) was passed, and Paulson decided how the first half of that money would be spent.

Just as Democratic Senator Byron Dorgan had warned: “I think we will in 10 years time look back and say we should not have done that.”

According to the nonpartisan Congressional Budget Office TARP resulted in a net cost to taxpayers of $73 billion, and 5.5 million more jobs were loss than predicted in September of 2008.

According to the Federal Reserve, we lost $3.4 trillion in real estate wealth, and $7.4 trillion in stock wealth from July 2008 to March 2009. 


Post a Comment

<< Home