Senate Majority: Out of Touch with Reality
Posted by msrb on October 2, 2008
More from pundits on bailout of Wall Street gamblers
Ralph Nader: “As predatory lending mushroomed out of control, the regulators — key among them, the Federal Reserve and the Office of Comptroller of Currency — sat on their hands. The Federal Reserve took exactly three formal actions against subprime lenders from 2002 to 2007. Bloomberg news service found that the Office of Comptroller of the Currency, which has authority over almost 1,800 banks, took three consumer-protection enforcement actions from 2004 to 2006. [Full Article by Nader: In the Public Interest: Behind The Deregulatory Curtain.]
A demonstrator stands outside the New York Stock Exchange in New York, September 29, 2008. REUTERS/Shannon Stapleton. Image may be subject to copyright.
ROBIN HAHNEL, a professor emeritus of economics at American University, currently visiting at Portland State University, is the author of “Panic Rules!: Everything You Need to Know About the Global Economy,” “The ABCs of Political Economy: A Modern Approach,” and “Economic Justice and Democracy: From Competition to Cooperation.”
He said today: “An unregulated financial industry is an accident waiting to happen. Eighty years ago that lesson was learned and New Deal legislation ushered in an unprecedented era of financial stability. But over the past 30 years the U.S. financial industry, Republican free market ideologues, and ‘New Democrats’ have conspired to eliminate necessary safeguards. The result is a financial system now dominated by three megabanks where those engaged in unregulated, risky investment banking once again have full access to the savings of ordinary people in commercial banks that are experiencing a category four financial meltdown.
“A week ago Secretary of the Treasury Paulson came to Congress with a terrible three-page proposal designed to bail out Wall Street but not Main Street with no oversight or judicial review. A week of negotiations with congressional leadership added 99 pages of window-dressing to the Paulson plan, devoid of any enforceable protections for taxpayers or homeowners, that was voted down by the House of Representatives, leaving us with no effective government response to a financial crisis that worsens by the hour.”
TIMOTHY CANOVA, a professor of international economic law at the Chapman University School of Law in Orange, California, is the author of an articles related to the current crisis titled: The Legacy of the Clinton Bubble.
He said today: “I am unconvinced that this $700 billion bailout for Wall Street will have any lasting positive effect. If the goal is to help the credit markets, the Federal Reserve already has the authority to purchase commercial paper and support the money markets. The Bush administration is once again using fear to scare people into supporting a dangerous course. There are almost 10,000 foreclosures a day now, and between one and two million adjustable rate mortgages are due to adjust upward in the next year. Without help for the bottom of the pyramid, Wall Street will be back next year asking for another trillion dollars.
This was Japan’s quagmire in the 1990s. The decline in housing prices must be stopped in its tracks and the sooner the better.
“Obama is saying many of the right things — that we should be helping Main Street as well as Wall Street, and that we need to re-regulate Wall Street. But like many in Congress, he’s also saying that these things can wait until next year, that such measures should not be in the bailout package. However, now is the time when Wall Street is desperate for taxpayer help for Congress to demand real help for Main Street.”
Canova addressed what he thinks is missing from the bailout plan: “First, there should be a moratorium on foreclosures and the Bankruptcy Code should be amended to allow people to modify their mortgage loans and stay in their homes. Congress should also extend the ban on short-selling in financial stocks. This could all be accomplished immediately. Any exceptions to a moratorium on foreclosures or to a ban on short-selling can wait some weeks or even months. Likewise, Congress should pass at least $50 billion in revenue sharing for state and local governments which have been hit hard by the decline in tax revenues stemming from falling property values.”
On the need to scrutinize the Federal Reserve, Canova said: “It was the Fed that helped gut the Glass-Steagall Act that had kept banks separate from securities speculation, and it was the Fed that lobbied against margin requirements and reserve requirements, and against the regulation of derivatives and hedge funds. All of this was the inevitable result of making the Federal Reserve ‘autonomous,’ a euphemism for the capture of the Fed by the same financial interests it should have been regulating. It’s like the fox running the henhouse.
“The Fed clearly violates both the Constitution’s Appointments Clause and its private non-delegation doctrine. But the federal courts have dismissed these challenges on very narrow procedural grounds, namely that plaintiffs lack standing because the courts say they cannot show they were directly injured by the Fed. It’s ludicrous, and Congress has the power to change the Fed’s structure and make it more accountable to a wider range of interests and perspectives.” (Source)
- In the Public Interest
- House Nixes Bailout Plan [for now!]
- More Quotes on Financial Markets Meltdown
- Who Needs Corporations?