http://www.rollingstone.com/politics/ne ... 804?page=2
some excerpts:
Over a long year of feverish lobbying and brutally intense backroom negotiations, a group of D.C. insiders fought over a single question: Just how much of the truth about the financial crisis should we share with the public? Do we admit that control over the economy in the past decade was ceded to a small group of rapacious criminals who to this day are engaged in a mind-numbing campaign of theft on a global scale? Or do we pretend that, minus a few bumps in the road that have been smoothed out . . .
The huge profits that Wall Street earned in the past decade were driven in large part by a single, far-reaching scheme, one in which bankers, home lenders and other players exploited loopholes in the system to magically transform subprime home borrowers into AAA investments, sell them off to unsuspecting pension funds and foreign trade unions and other suckers, then multiply their score by leveraging their phony-baloney deals over and over . . . with the government borrowing mountains of Chinese and Saudi cash to fight two crazy wars, and the domestic manufacturing base mostly vanished . . . we were a nation subsisting on an elaborate check-bouncing scheme.
And it was all made possible by two major deregulatory moves from the Clinton era: the Gramm-Leach-Bliley Act of 1999, which allowed investment banks, insurance companies and commercial banks to merge, and the Commodity Futures Modernization Act of 2000, which *exempted the entire derivatives market from federal regulation. Together, these laws transformed Wall Street into a giant casino . . . even crazier than a casino, because in a casino you have to put up actual money to make bets. But thanks to deregulation, financial companies like AIG could bet billions, if not trillions, without having any money at all . . . .
Dodd-Frank was never going to be a meaningful reform unless these two fateful Clinton-era laws – commercial banks gambling with taxpayer money, and unregulated derivatives being traded in the dark – were reversed. The story of how the last real shot at reining in Wall Street got routed tells you everything you need to know about how, and on whose behalf, our government works.
. . . two final battles coalesced around an effort by Sens. Carl Levin of Michigan and Jeff Merkley of Oregon to implement the so-called "Volcker rule," a proposal designed to restore the firewall between investment houses and commercial banks. At the heart of Merkley-Levin was a ban on "prop trading" . . . a fancy term for banks gambling in the market for their own profit.
Thanks to deregulation, giant commercial banks like JP Morgan Chase were not only allowed to serve as investment banks, accumulating mountains of privileged insider information, they were allowed to play the markets themselves . . . Goldman Sachs could bet heavily against Greek debt not long after the bank had saddled Greece with toxic interest-rate swaps. It also meant that if any of these "too big to fail" banks went bust, American taxpayers would bail them out. The Volcker rule . . . aimed to lay down a simple law for big banks: If you want to gamble like a drunken sailor, fine. Just don't expect us to mop up the mess after you puke . . .
If Obama's team had had their way, the debate over the Volcker rule would never have happened. The original version of the finance-reform bill . . . heavily influenced by treasury secretary and noted Wall Street stooge Timothy Geithner . . . contained no attempt to ban banks with federally insured deposits from engaging in prop trading
. . . on January 21st, President Obama pulled a 180 and announced his support for the Volcker rule . . . the administration's attempt to get back on the right side of populist anger at Wall Street. So when Merkley and Levin took up the job of transforming Volcker's proposal into legislative reality, they assumed Democratic leadership would be on their side. It didn't work out that way. . . . it's obvious that he (Merkley) and Levin were on their own – no one with any juice in the key committees lifted a finger to help them.
there's more to it, of course, but that's the gist of it. interesting article . . .Throughout the debate, Democrats had sold the public on the idea that it was the Republicans who were killing progressive initiatives. In reality, Republican and Democratic leaders were working together with industry insiders and deep-pocketed lobbyists to prevent rogue members like Merkley and Levin from effecting real change
. . . with Merkley-Levin looking like a good bet to pass, the Republicans pulled a dual-suicide maneuver. Brownback withdrew his auto-dealer exemption, which instantly killed the ban on prop trading. What Merkley and Levin didn't know was that Brownback had worked out an agreement with the Democratic leadership . . . In other words, Democratic leaders had teamed up with Republicans behind closed doors to double-cross Merkley and Levin.
