How U.S. Regulators Laid the Groundwork for Disaster
How U.S. Regulators Laid the Groundwork for Disaster
This newsletter editon focuses on the economic crisis and a local news update.
Take Action News Alert
Don't miss our Action Newsletter to follow this edition. In it we highlight multiple ways to get involved. Some of you are already involved with your neighborhood team or with a candidate's campaign, but many of you have put off participating. There is something for everyone. Now is the time to step forward and take action!
This video will compel you to get involved. This one will inspire you to get involved. There are four weeks until election day - don't wait 'til it's too late!
The Cost of Deregulation
The cost of deregulation is indeed very high --- to the U.S. taxpayer.
| Bailout type | Cost to taxpayers |
|---|---|
| Treasury Department legislation | $700 billion+ |
| Bear Stearns financing | $29 billion |
| Fannie Mae and Freddie Mac nationalization | $200 billion |
| AIG loan and nationalization | $85 billion |
| Federal Housing Administration housing rescue bill | $300 billion |
| Mortgage community grants | $4 billion |
| JPMorgan Chase repayments | $87 billion |
| Loans to banks via Fed's Term Auction Facility | $200 billion+ |
| Loans from Depression-era Exchange Stabilization Fund | $50 billion |
| Purchases of mortgage securities by Fannie Mae and Freddie Mac | $144 billion |
| TOTAL | $1.8 trillion+ |
| COST PER HOUSEHOLD | $17,064+ |
(Source: Reuters)
How U.S. Regulators Laid the Groundwork for Disaster
NYTimes: The Reckoning: Agency’s ’04 Rule Let Banks Pile Up New Debt
Many events in Washington, on Wall Street and elsewhere around the country have led to what has been called the most serious financial crisis since the 1930s. But decisions made at a brief meeting on April 28, 2004, explain why the problems could spin out of control. The agency’s failure to follow through on those decisions also explains why Washington regulators did not see what was coming.
On that bright spring afternoon, the five members of the Securities and Exchange Commission met in a basement hearing room to consider an urgent plea by the big investment banks.
They wanted an exemption for their brokerage units from an old regulation that limited the amount of debt they could take on. The exemption would unshackle billions of dollars held in reserve as a cushion against losses on their investments. Those funds could then flow up to the parent company, enabling it to invest in the fast-growing but opaque world of mortgage-backed securities; credit derivatives, a form of insurance for bond holders; and other exotic instruments.
The five investment banks led the charge, including Goldman Sachs, which was headed by Henry M. Paulson Jr. Two years later, he left to become Treasury secretary.
A lone dissenter — a software consultant and expert on risk management — weighed in from Indiana with a two-page letter to warn the commission that the move was a grave mistake. He never heard back from Washington.
This article is now the most popular on the NYTimes site.
New Kingsdale Proposal Arrives -- Take Our Survey
Continental Real Estate has proposed a mixed-use plan for Kingsdale. Read over this press release and this article, then then take this short survey. We'll summarize the survey results and post them for everyone to see.