Posted: July 29th, 2012 by Militant Libertarian
The generally accepted theory of the 2008 financial meltdown is that it just happened suddenly, although financial troubles were indeed expected to be significant from the fallout of the the mortgage debacle and the real estate crash. Moreover, it is also generally accepted that the Bush Administration reacted as if the sudden financial calamity was indeed something that just happened out of the blue.
There is overwhelming evidence that the Banksters were crashing in 2004, an election year, and that the Bush Administration merely covered it up. In the way of background information that built the foundation for the financial collapse, it all goes back to a 1999 piece of legislation signed by Bill Clinton and supported by Republicans and Democrats called the Financial Services Modernization Act (FSMA). The gory details of the FSMA were astutely laid out in a Global Research 11/12/08 piece by Michel Chossudovsky titled “Who are the Architects of the Economic Collapse” who names the big names and summarizes the bill:
Under the 1999 Financial Services Modernization Act, effective control over the entire US financial services industry (including insurance companies, pension funds, securities companies, etc.) had been transferred to a handful of financial conglomerates and their associated hedge funds….
Summers, Geithner, Corzine, Volker, Fischer, Phil Gramm, Bernanke, Hank Paulson, Rubin, not to mention Alan Greenspan, al al. are buddies; they play golf together; they have links to the Council on Foreign Relations and the Bilderberg; they act concurrently in accordance with the interests of Wall Street; they meet behind closed doors; they are on the same wave length; they are Democrats and Republicans.
While they may disagree on some issues, they are firmly committed to the Washington-Wall Street Consensus. They are utterly ruthless in their management of economic and financial processes.
There is no question that the 1999 Financial Services Modernization Act definitely set the stage for ‘Banksters Gone Wild’. By 2004 there was ample evidence that something was radically wrong although nobody noticed at the time. Post 2008 financial collapse, every financial journalist was scrambling to figure precisely what happened, why it happened and how it happened. After all, America is a nation that is supposedly swimming in mountains of legislation fictitiously dubbed ‘consumer protection bills’ and/or just updating laws to comport with modern financial trends and technology.
In a stunning October, 2008 disclosure, New York Times reporter Stephen Labaton laid out a startling account of a secretive meeting in 2004 that explains all we need to know in a piece titled:
The piece starts with:
“We have a good deal of comfort about the capital cushions at these firms at the moment.” — Christopher Cox, chairman of the Securities and Exchange Commission, March 11, 2008.
Drained of most of its cash three days later, Bear Stearns was forced into a hastily arranged marriage with JPMorgan Chase — backed by a $29 billion taxpayer dowry.
Within six months, other lions of Wall Street would also either disappear or transform themselves to survive the financial maelstrom — Merrill Lynch sold itself to Bank of America, Lehman Brothers filed for bankruptcy protection, and Goldman Sachs and Morgan Stanley converted to commercial banks.
How could Mr. Cox have been so wrong?
Although Latham burns a lot of ink attempting to spin the disaster into some type of a regulatory failure while focusing on the SEC’s refusal to adequately police the Banksters, his story unwinds with remarkable facts and clarity, as if Latham himself didn’t even want to believe his own story or the horror that were unfolding before his eyes.
…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.
At this juncture, it’s important to understand precisely what the Banksters were demanding at the secret meeting in the basement of the SEC. Furthermore, it’s impossible that Bush and his Administration were not aware of the meeting, who attended the meeting and what the meeting was all about. Bush and Gang undoubtedly didn’t want anybody to know about the meeting. Congress was not informed.
The Banksters were demanding that they be given a green light to borrow more money and increase leverage so they could gamble on more wild ass investment schemes.
In the post 2008 disaster analysis, Alan Blinder,a former Federal Reserve Vice-Chairman, blamed the SEC for allowing the Banksters to increase their leverage and further stated “Before then, leverage of 12 to 1 was typical; afterward, it shot up to more like 33 to 1. What were the SEC and the heads of the firms thinking?”, here.
That’s precisely what happened at the secret 2004 meeting – capital requirements were lowered and Wall Street Banksters were allowed to increase leverage from 12:1 to 33:1 (and even higher).
This is the equivalent of a gambler being up to his eyeballs in casino debt and asking the casino to increase his credit so he can continue gambling in the hope that he might win and wipe out his bankrupting losses.
After the dirty deal was struck to appease the gambling Banksters, SEC Commissioner Roel C. Campos, a former federal prosecutor, said “And I keep my fingers crossed for the future.”
Everybody at that meeting precisely understood the situation. They kept their fingers crossed and the Banksters imploded anyway, along with the global economy.
With that, the five big independent investment firms were unleashed….
Over the following months and years, each of the firms would take advantage of the looser rules. At Bear Stearns, the leverage ratio — a measurement of how much the firm was borrowing compared to its total assets — rose sharply, to 33 to 1. In other words, for every dollar in equity, it had $33 of debt….
The commission’s decision effectively to outsource its oversight to the firms themselves fit squarely in the broader Washington culture of the last eight years under President Bush.
That’s what happens in the District of Crime (DC). Agencies and Congress Critters routinely outsource power to the very folks an agency is responsible for regulating, which, of course, is why the concept of regulation is a joke. It’s more like a license to steal, concentrate power and legalize monopolies. Had Wall Street turmoil, fraud, deceit and gambling addiction been allowed to blow up in 2004 when it rightfully should have, we’d still be in a mess but a mess not nearly as big and economically devastating as the mess we are currently enduring.
One thing is clear. Bush and Gang are clearly responsible for allowing this to happen. Unquestionably, Bush put the entire nation at grave risk on a gamble he lost. I’m sure that Bush did the exact same thing the SEC commissioners did – crossed his fingers.
On a more disturbing note, why should any federal agency have the kind of raw and absolute power that allows the SEC to allow the Banksters to bring down an entire nation and the global financial system?
In the District of Crime, Congress Critters and the President are nothing but wholly owned subsidiaries of the Banksters. Now the suffering taxpayers who are themselves struggling in a Bankster created economic horror are still bailing out the thieving Banksters and their gambling losses.
It’s the American way – a nation where crime really does pay.