Jesse’s Café Américain posted a provocative, comprehensive report from Wall Street Watch describing Washington and Wall Street’s betrayal of America, bringing our economy into a state of collapse.
The Wall Street Watch project is jointly sponsored by the Consumer Education Foundation and Essential Information.
Weekend Reading: How Wall Street and Washington Are Betraying America
Courtesy of Jesse’s Café Américain
The original title for this essay was "How Wall Street and Washington Betrayed America." As you can see from the above, this blog has a slightly different perspective.
We would like to be able to say that this was an unfortunate problem that has occurred, and that we are dealing with its aftermath. The repair of the economy is just a matter of time and money.
It is not, and we are not.
The problem continues. This was not an exogenous event like an accident. It is a pernicious condition, a chronic wasting disease. The carriers of the infection are still at work.
The system is distorted, sick, incapable of self-cure. Feeding intravenous liquidity to obtain the appearance of health will not work, only allow the disease to progress. Strong medicine is required.
We will have no recovery until we have reform.
We will have no reform until the banks are restrained, and balance is restored.
The looting of the public Treasury will continue while the Congress and the Executive take their direction from Wall Street.
Paying for Policy in Washington
Wall Street’s Best Investment
By ROBERT WEISSMAN"The entire financial sector (finance, insurance, real estate) drowned political candidates in campaign contributions, spending more than $1.7 billion in federal elections from 1998-2008. Primarily reflecting the balance of power over the decade, about 55 percent went to Republicans and 45 percent to Democrats. Democrats took just more than half of the financial sector’s 2008 election cycle contributions.
The industry spent even more — topping $3.4 billion — on officially registered lobbyists during the same period. This total certainly underestimates by a considerable amount what the industry spent to influence policymaking. U.S. reporting rules require that lobby firms and individual lobbyists disclose how much they have been paid for lobbying activity, but lobbying activity is defined to include direct contacts with key government officials, or work in preparation for meeting with key government officials. Public relations efforts and various kinds of indirect lobbying are not covered by the reporting rules.
During the decade-long period:
* Commercial banks spent more than $154 million on campaign contributions, while investing $383 million in officially registered lobbying;
* Accounting firms spent $81 million on campaign contributions and $122 million on lobbying;
* Insurance companies donated more than $220 million and spent more than $1.1 billion on lobbying; and
* Securities firms invested more than $512 million in campaign contributions, and an additional nearly $600 million in lobbying. Hedge funds, a subcategory of the securities industry, spent $34 million on campaign contributions (about half in the 2008 election cycle); and $20 million on lobbying. Private equity firms, also a subcategory of the securities industry, contributed $58 million to federal candidates and spent $43 million on lobbying.
Individual firms spent tens of millions of dollars each. During the decade-long period:
* Goldman Sachs spent more than $46 million on political influence buying;
* Merrill Lynch threw more than $68 million at politicians;
* Citigroup spent more than $108 million;
* Bank of America devoted more than $39 million;
* JPMorgan Chase invested more than $65 million; and
* Accounting giants Deloitte & Touche, Ernst & Young, KPMG and Pricewaterhouse spent, respectively, $32 million, $37 million, $27 million and $55 million.
The number of people working to advance the financial sector’s political objectives is startling. In 2007, the financial sector employed a staggering 2,996 separate lobbyists to influence federal policy making, more than five for each Member of Congress. This figure only counts officially registered lobbyists. That means it does not count those who offered "strategic advice" or helped mount policy-related PR campaigns for financial sector companies. The figure counts those lobbying at the federal level; it does not take into account lobbyists at state houses across the country. To be clear, the 2,996 figure represents the number of separate individuals employed by the financial sector as lobbyists in 2007. We did not double count individuals who lobby for more than one company the total number of financial sector lobby hires in 2007 was a whopping 6,738.
A great many of those lobbyists entered and exited through the revolving door connecting the lobbying world with government. Surveying only 20 leading firms in the financial sector (none from the insurance industry or real estate), we found that 142 industry lobbyists during the period 1998 – 2008 had formerly worked as "covered officials" in the government. "Covered officials" are top officials in the executive branch (most political appointees, from members of the cabinet to directors of bureaus embedded in agencies), Members of Congress, and congressional staff.
Nothing evidences the revolving door — or Wall Street’s direct influence over policymaking — more than the stream of Goldman Sachs expatriates who left the Wall Street goliath, spun through the revolving door, and emerged to hold top regulatory positions. Topping the list, of course, are former Treasury Secretaries Robert Rubin and Henry Paulson, both of whom had served as chair of Goldman Sachs before entering government. Goldman continues to be well represented in government, with among others, Gary Gensler, President Obama’s pick to chair the Commodity Futures Trading Commission, and Mark Patterson, a former Goldman lobbyist now serving as chief of staff to Treasury Secretary Timothy Geithner.
All of this awesome influence buying has enabled Wall Street to establish the framework for debates in Washington, and to obtain very specific deregulatory actions, with devastating consequences."
Click below to find the full report with Executive Summary.
Sold Out: How Wall Street and Washington Betrayed America
Here’s another excerpt:
Blame Wall Street for the current financial crisis. Investment banks, hedge funds and commercial banks made reckless bets using borrowed money. They created and trafficked in exotic investment vehicles that even top Wall Street executives — not to mention firm directors — did not understand. They hid risky investments in offbalance-sheet vehicles or capitalized on their legal status to cloak investments altogether. They engaged in unconscionable predatory lending that offered huge profits for a time, but led to dire consequences when the loans proved unpayable. And they created, maintained and justified a housing bubble, the bursting of which has thrown the United States and the world into a deep recession, resulted in a foreclosure epidemic ripping apart communities across the country…
For the last three decades, financial regulators, Congress and the executive branch have steadily eroded the regulatory system that restrained the financial sector from acting on its own worst tendencies…
But it was not its imperfections that led to the erosion and collapse of that regulatory system. It was a concerted effort by Wall Street, steadily gaining momentum until it reached fever pitch in the late 1990s and continued right through the first half of 2008. Even now, Wall Street continues to defend many of its worst practices. Though it bows to the political reality that new regulation is coming, it aims to reduce the scope and importance of that regulation and, if possible, use the guise of regulation to further remove public controls over its operations.
This report has one overriding message: financial deregulation led directly to the financial meltdown.
