GOP PROPOSES SECOND WALL STREET BAILOUT

According to a recent article in Forbes.com, more than 60 percent of stock owners believe the market is rigged for insiders. They favor stricter regulations on financial institutions and nearly 90 percent believe the federal government has failed to limit the power of Wall Street.

With no lack of irony the House Financial Services Committee met this week to increase the power of Wall Street by eliminating regulations and enhancing the ability of insiders to manipulate markets. Committee Chairman, Jeb Hensarling, called the meeting to repeal the recently passed Dodd-Frank financial reform legislation.  Hensarling claims it is an unreasonable burden on economic freedom.

If economic freedom is the goal of Chairman Hensarling, it is worth considering the recent history of economic freedom and deregulation:

        

Savings and Loan Industry

1982  Savings and Loans (S&L) industry deregulated.

1987  S&L deposit insurance fund declared insolvent

1989  S&L industry implodes.  $160 billion taxpayer bailout for 1,034 failed S&Ls.

 Commercial Banks/Investment Banks

1999  Deregulation of investment banks & commercial banks

2000 Deregulation of derivatives, futures and credit default swaps

2008  Implosion of investment & commercial banks. $700 billion TARP bailout

It took only five years from the deregulation of the S&L industry to the day its insurance fund went bankrupt.  It took only nine years from the deregulation of the commercial and investment banks until they were at death’s door.

To date, the balance sheets of banks, hedge funds and shadow banking institutions are as opaque as ever. The Dodd-Frank reforms called for greater transparency, but banking lobbyists have derailed more than half of the regulations written to enforce the act. Moreover, the six largest U.S. financial institutions are nearly 40 percent larger than they were before 2008.

But these are the old problems that might be considered the last war.

Since the 2010 passage of Dodd-Frank, a new industry of dark pools and high-frequency traders (HFTs) have proliferated. HFTs take no risk and rip off investors from the smallest retail traders to the largest institutional mutual funds. Their activities have been well documented by Scott Patterson in Dark Pools and Michael Lewis in Flash Boys.

Rather than going to work on this issue, the House Financial Services Committee held a meeting to chastise those who expressed a concern about HFTs.

Dodd-Frank might have been fighting the last war but it did provide some protections for consumers, investors, depositors and taxpayers.

The House Financial Services Committee appears to be waving the white flag of surrender on these protections. Will Congress, once again, put the  economic future of the U.S. in the hands of Wall Street?

5 comments

  1. Patti Lynn · · Reply

    Time to call in Senator Elizabeth Warren!!! NO!! to more bailouts, unless we’re bailing out the Middle Class, working folks, and those NOT in the to 1%. Please read, “A Fighting Chance,” Senator Warren’s book, for a new perspective on solving the “Wall Street Problem.”

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  2. Concerned Democrat · · Reply

    Yet people still vote Republican and Rick Scott is on the verge of being re-elected because the average voter is driven by the millions in TV ads and is too stupid to know better.

    Obama was able to win ONLY because he was able to OUT raise the Republicans in 08 and 12 AND spend like crazy to have a great ground game run by Chicago to register and drag those lazy ass Democrats to vote.

    And sadly there was no Obama in ’10 and we have Rick Scott….and now in ’12 we have a rerun of ’10 and we have a 70 plus year old woman who nobody knows from Miami who can’t raise a dime if her life depended in it and is getting slaughtered against a three time party changeling who nobody trusts.

    And to top it off we have THE most incompetent, self-serving and worthless leadership in Allison Tant, Scott Arceneaux and Christian Ulvert propped up by Debbie Wasserman Shultz and who pisses everybody off and a very old another 70 plus year old Democratic Senator in Bill Nelson on his last wing and prayer who always strides the fence on every issue who along with DWS is personally responsible for installing the “consultant’s puppets” to keep their gravy train going.

    Only when the Democrats hit rock bottom and loose everything in Florida will the Progressives and Susan Smith finally loose their feeble power (they are the ones who pushed for and voted for this incompetent leadership in the first place) and maybe, just maybe, common sense centrist leadership will prevail and the Democrats can scrape and crawl their way back.

    Maybe

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  3. janl65 · · Reply

    Goddamit, a copy of Lewis’ “Flash Boys” needs to be handed to every member of Congress and then these nitwits need to be required to READ the thing! More oversight, more regulation is needed and the elimination of the rigging of the markets by the insiders, by which they are making billions of dollars at the expense of ordinary investors, must somehow be accomplished. Does the small investor know that all of these trading firms are SELLING their info on trades the moment they are made? This is institutionalized theft, and all of the bozos cheerleading for less regulation in Congress know it full well! They are all in on it!

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  4. Dark Pools is a good one too, as its Patterson’s earlier book, The Quants.

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  5. as “is” Patterson’s earlier book.

    Like

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