Selective Finger-Pointing
Republicans have pushed deregulation on industry and the financial markets for thirty years. They have extolled the benefits of free markets. Now, as the American economy stands on the brink of a collapse unlike any since before the great regulatory reforms of FDR's New Deal, John McCain and Republicans are desperately trying to evade being pinned as the party responsible. Trey Garrison reaches back to a 1999 Wall Street Journal story for exculpatory evidence.
"Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits."
The emphasis in the WSJ story is Garrison's. He latches on to the finger pointed at the Clinton administration, daringly concluding, "The problem is not too little, but too much, government regulation. As usual."
Garrison blindly ignores the second source of pressure. "[Fannie Mae] felt pressure from stock holders to maintain its phenomenal growth in profits." Garrison hides the fact that, since 1968, Fannie Mae has been a stockholder-owned private corporation. Fannie Mae was under pressure from multiple directions. From the government, eager to increase homeownership among working-class families. But also from the stockholders, greedy for dividends and capital gains. There's enough blame to go around in this disaster. There were bad bets by the government, by Fannie Mae, by Wall Street banks that bought up this junk paper, and by every individual investor who put any of his or her investments into anything associated with the risky mortgage-backed securities. Pretty much everyone shares the blame here. The saddest outcome of this disaster is if we don't learn from it. And Trey Garrison is proving to be one particularly slow learner.
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Today, Scott Burns published a laundry list of the recent abuses of our financial system:
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• Bear Stearns paid millions of dollars to settle federal charges of illegal loan collection practices.
• Bank of America, UBS, Merrill Lynch, Morgan Stanley and Wachovia deceived investors by selling them risky auction-rate securities as perfectly safe.
• GMAC Bank and other student loan companies engaged in deceptive advertising.
• IndyMac Bank routinely issued liar loans until it went broke.
• Countrywide engaged in deceitful lending.
• J.P. Morgan Chase, Citigroup and CIBC paid billions to settle charges of engaging in securities fraud.
• The supposedly independent rating companies – Standard & Poor's, Moody's and Fitch – gave bond insurers triple-A ratings to fatten their wallets when D-minus was what they deserved.
• HSBC and Citigroup specialized in structured investment vehicles to conceal their risky mortgage holdings.
• Freddie Mac failed to fully disclose its portfolio losses.
• AIG hid huge losses on its credit default swaps.
• Lehman Brothers failed to come clean about its real estate losses.
• Lehman Brothers, Morgan Stanley, Citigroup and Merrill Lynch competed with one another in developing abusive tax-evasion schemes.
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Then, Scott Burns reveals that it's the federal government itself that gets the prize for being the biggest liar of them all. Anyone who thinks that the solution to all this is less regulation, less oversight of Wall Street, and fewer checks and balances on the Congressmen and Cabinet secretaries and bureaucrats in Washington, anyone who thinks that is more than a few cents short of a dollar.
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