Agency’s ’04 Rule Let Banks Pile Up New Debt, and Risk

[Celebration]

Source: New York Times

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.


Read more: http://www.nytimes.com/2008/10/03/business/03sec.html?em

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Please read this whole article if you want some insight into the history of this debacle. Paulson played a huge part in causing this mess, as did the narrowing of the SEC's focus under Christopher Cox.

[EnviroBat]

1. I guess I just don't get it anymore.

All I've been hearing for the past week now is "We need to free up credit, so people can go buy cars, and get house loans, and borrow money to make pay-roll..." Wha? Hold on. Do you mean to tell me that the entire basis of our economy is founded in our debt? The solution to this whole, national bend-over is for us to borrow more money? Are you fucking kidding me? Perhaps a crash SHOULD happen in this country! Borrow borrow borrow! Buy shit you don't need, and ultimately can't afford! Fuck living within a budget, where's the fun in that? And why in the world are you running a small business if you're not making enough revenue to pay the workers you hire without BORROWING THE FUCKING MONEY FOR PAYROLL? It's not just the mortgage issue that has caused the problems, but that is a convenient scapegoat. God forbid you place the blame on Sally and Joe "Bright-ideas". You know the ones. Wake up one morning and drive the Denali down to the local Starbucks. Whip up some half-assed business plan on their iBook over non-fat lattes, and

rush to the bank to borrow money for their fucking new antique shop.

How fucking quaint! Meanwhile, all of the other self-important fucks with rich mommies and daddies, and equally half-assed business plans have also opened these retarded antique shops, ON THE SAME STREET! Now, nobody is buying antiques. :shrug: Boo Hoo Sally and Joe, whatever shall you do? Gee I guess your little "Lets start our own business honey..." plan has gotten you in over your narcissistic heads. I guess you could BORROW MORE MONEY, or just walk away and let the bank have this little shit-house you've created. What's that you say? You fronted the brats college tuition for the "business". Well shit, just borrow the money for school! You see kids, without debt, there is no control over the retarded populace. Read that again, if you are in debt, than you are subject to the rules of that debt. Suddenly skyrocketing interest rates at the merest whim of the credit card company. Adjustable rate mortgages.

I guess the real blame lies with those of us who have fed this fire of oblivion for years now. "Aw hell, I'll just borrow the money, I'll have it paid off eventually...' Bullshit. Credit is immoral, and our entire economy has been founded on it. Now we are seeing the piper come to collect. Maybe we'll wake up some day and realize that we are being gamed by this fragile system designed to make the rich wealthier, and keep the sheep living a life of servitude. We all happily borrow more and more, while more and more of us lose our jobs in the latest H1B flood, inspired by free-trade utopia. And Wall Street scratches it's head while the fucking republicans deregulate and let them OJ Simpson the banking industry. (Get away with murder in case you missed the reference). What's in YOUR wallet? Nothing but maxed out credit cards? Good, now here's another one at 23%. I've always thought there was a sinister overtone to those Capital One commercials. Almost as if they were saying, "It had better be a Capital One Credit Card, or we're going to fucking KILL you"! Well, they're killing us all now aren't they?

God help us, we are fucking stupid...

[Celebration]

2. So called "free market capitalism"

Is pretty much a joke when we have the current monetary system. It is set up purposefully to be manipulated by the Federal Reserve Board, supposedly to ensure that we don't have these kinds of crises.

What we have in this case is a complete failure of our regulatory apparatus, and the motivation for all of this was lack of prudence and pure greed. Our leadership over the last eight years is responsible for this.

I don't think Jesus liked the moneylenders, did he? How ironic that it is the fundamentalist Christians and the moneylenders who teamed up to give us this disaster of an economy.

[EnviroBat]

3. Yep, it certainly is ironic...

:hi:

[girl gone mad]

4. Does anyone have a password?

my cookies got deleted.

[UpInArms]

5. try this

www.bugmenot.com

edited to fix link

[girl gone mad]

7. thank you! n/t

[DeepModem Mom]

6. K&R

[underdoggie]

8. Drive out the moneychangers *NOT*

And EnviroBat saith:
"God help us, we are fucking stupid..."

The Lord must have so loved the common "stupid" taxpayer,
He created so many of them
That they might patriotically bailout
His most chosen Money Changers who
S*it on the right hand of God
on Earth as it is in Heaven.
For praise be the God who art in Heaven
where the two greatest virtues,
ignorance and gullibility,
shall reign forever and ever
unto eternity.
Amen

[Piewhacket]

9. Guillotine.... who's got a guillotine???

Paulson should be fired. Or he should just save everyone
the trouble and just JUMP!!!!

Somebody (who can) please draw up a cartoon.....

Tall building with Paulson teetering on the edge, holding a big steel
ball labeled "culpability", with a rope around his waist tied to
Wall Street, to Bush, to Cheney, to Republicans dot dot dot...
the bubble caption reveals what John Q. Public far below is thinking

"a small step for a man, a giant leap for mankind."