Wall Street spent $5 Billion in one decade in Washington to buy the deregulation that resulted in the financial meltdown. These are the mind-numbing numbers in a new report released this week by Essential Action and the Consumer Education Foundation that says everything Americans need to know about how and why the economy collapsed.
From their press release:
The report, "Sold Out: How Wall Street and Washington Betrayed America," shows that, from 1998-2008, Wall Street investment firms, commercial banks, hedge funds, real estate companies and insurance conglomerates made $1.725 billion in political contributions and spent another $3.4 billion on lobbyists, a financial juggernaut aimed at undercutting federal regulation. Nearly 3,000 officially registered federal lobbyists worked for the industry in 2007 alone. The report documents a dozen distinct deregulatory moves that, together, led to the financial meltdown. These include prohibitions on regulating financial derivatives; the repeal of regulatory barriers between commercial banks and investment banks; a voluntary regulation scheme for big investment banks; and federal refusal to act to stop predatory subprime lending.
As Harvey Rosenfield (Consumer Watchdog’s founder) said for CEF:
"The report details, step-by-step, how Washington systematically sold out to Wall Street," says Harvey Rosenfield, president of the Consumer Education Foundation, a California-based non-profit organization. "Depression-era programs that would have prevented the financial meltdown that began last year were dismantled, and the warnings of those who foresaw disaster were drowned in an ocean of political money. Americans were betrayed, and we are paying a high price — trillions of dollars — for that betrayal."
Robert Weissman and James Donahue pull out 10 of those regulatory failures in this month’s Multinational Monitor (a project of Essential) in their article “Wall Street’s Best Investment: Ten Deregulatory Steps to Financial Meltdown.”
Their ten steps:
- The Repeal of Glass-Steagall and the Rise of the Culture of Recklessness
- Hiding Liabilities: Off-Balance Sheet Accounting
- The Executive Branch Rejects Financial Derivative Regulation
- Congress Blocks Financial Derivative Regulation
- The SEC’s Voluntary Regulation Regime
- No Predatory Lending Enforcement
- Federal Preemption of State Regulation and Consumer Protection Laws
- Escaping Accountability: Assignee Liability
- Merger Mania
- Rampant Conflicts of Interest: Credit Ratings Firms’ Failure
Senate and House committees have started investigating how we must overhaul financial regulation to prevent the next meltdown. (My take on one of those hearings yesterday.) They should not make the same mistakes as they draft a new regulatory regime. Every member of Congress should reject campaign contributions from the Wall Street titans who are now begging for their help. Two decades from now, if they don’t get it right, another group will ‘follow the money’ and know that Wall Street again bought their way out of accountability.