How U.S. Regulators Laid the Groundwork for Disaster

NYTimes: The Reckoning: Agency’s ’04 Rule Let Banks Pile Up New Debt

Many events in Washington, on Wall Street and elsewhere around the country have led to what has been called the most serious financial crisis since the 1930s. But 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.

A lone dissenter — a software consultant and expert on risk management — weighed in from Indiana with a two-page letter to warn the commission that the move was a grave mistake. He never heard back from Washington.

This article is now the most popular on the NYTimes site.


If you own a dog

Watch this video:

Sarah Palin is an enthusiastic supporter of aerial wolf gunning. Often wolves shot from the air are not killed outright and left to die on the ground. Palin enthusiastically defends this cruelty. You can find out more here.

It is no accident that the Humane Society Legislative Fund has decided to endorse Obama for president this year. They have never endorsed a president before.

Rep. Ted Celeste Earns Dispatch Endorsement

Congratulations to Ted Celeste on his endorsement by the Columbus Dispatch:

For General Assembly: Ted Celeste, Dan Stewart, Tracy Heard
Three incumbents in 24th, 25th and 26th districts merit another House term
Wednesday, October 1, 2008 3:18 AM

As state lawmakers and the governor continue to grapple with problems such as Ohio's stagnant economy, school funding and a huge projected budget shortfall, incumbent state Reps. Ted Celeste, Dan Stewart and Tracy Heard have the experience to help.

• In the 24th District, which includes Grandview Heights, Marble Cliff, Upper Arlington and Valleyview, The Dispatch endorses first-term Democratic incumbent Ted Celeste.

Celeste, the younger brother of former Ohio Gov. Richard F. Celeste, has demonstrated the ability to reach out to majority Republicans in the legislature. He has made mental-health issues his specialty. He sponsored bills to cover treatment of post-traumatic stress disorder for military personnel, increase state services for families with autistic children and expand mental-health coverage to include drug and alcohol treatment. He is a former member of the Ohio State University board of trustees and is a longtime businessman, giving him a solid understanding of the state's higher-education needs and of the problems facing business owners.

He avoided negative ads in winning this seat in 2006 and continued that in this year's campaign against Republican Tim Rankin, who served two four-year terms on the Upper Arlington City Council.

He avoided negative ads in winning his seat in 2006 and continued that in this year's campaign. . ."

Top Ten Messages Left on Sarah Palin's Answering Machine

From The Late Show with David Letterman, October 3, 2008.
10. "Hi, it's John McCain; I had to go to bed. How did it go?"
9. "Katie Couric here. Have you thought of a Supreme Court case yet?"
8. "Hi, it's Bill Clinton. Let me know when Todd's out of town."
7. "My name is Joseph Six-Pack - Knock it off"
6. "Hi, Katie Couric again - Think of any newspapers yet?"
5. "Buy the Late Show Fun Facts. It's a bridge to hilarity"
4. "John McCain again; Could you pick up my prescriptions?"
3. "Senator Larry Craig here - Do you have Joe Biden's phone number?"
2. "McCain again; Do you remember where I parked the Straight Talk Express?"
1. "It's President Bush. If you're at the debate, who's watching Russia?"

The Statesman vs. the Hockey Mom

These next two installments of VP candidate interviews with Katie Couric show the stark contrast between Biden and Palin. Biden provides fluent and substantive answers. Palin ---- well not so much.

Here's Palin and Biden on Roe v. Wade:

Watch CBS Videos Online


And here's Palin and Biden on separation of church and state:

Watch CBS Videos Online

Celebs to Americans: Don't Vote!

Great video. Lots of laughs. Passing this video on to young people may be one of the most important things you do this election. Use our send to a friend link below.


Cafferty: Palin should "scare the hell out of you"

The fact that Palin’s studying to be Vice President through all-night cram sessions, as if the campaign were some undergrad final should, in Cafferty's words, "scare the hell out of [every American]".

Vice President of the United States is a position that requires someone who is already comfortable and familiar with the issues, not someone who’s stuffing facts and figures in her head at the last minute and hoping they all come out in the right order.

After showing an incoherent answer from Sarah Palin's interview with Katie Couric regarding the bailout, CNN's Jack Cafferty said,

"If John McCain wins this woman will be one 72-year-old's heartbeat away from being President of the United States. And if that doesn't scare the hell out of you, it should."

Wolf Blitzer then tries to play devil's advocate and suggests that Palin's incoherence might be the result of too much cramming. "Don't make excuses for her," counters a clearly upset Cafferty, who sums up Palin's performance in one word--pathetic."

UAPA says: Vote Yes on Issue 5!

391Ask yourself one question, "Is 391 percent interest too high?" Yes!

Now you know how to vote on Issue 5, Ohio's payday loan referendum that gready lenders are trying to get on the Nov. 4 ballot.

Upper Arlington Progressive Action first brought this to your attention several months ago when we learned about the effort to reform payday lending. We applauded the passage of House Bill 545, which reduced the annual percentage of interest that can be charged down to 28 percent.

Then the national payday lending lobby started its shanaigans. They are trying to overturn the reform measure by putting the issue on the ballot. But their petition circulators have been deceptive and their ballot language misleading.

UAPA joins nearly every major newspaper in Ohio, the governor, the speaker, the senate president, big-city mayors and city councils, and religious, business, civic and social leaders in urging you to remember:

YES to Issue 5.

Spread the word!

Want to help? Visit

News Briefs

houseObama Expected to Better Address Housing Market Issues than McCain, According to Survey

Housing/Mortgage/Foreclosure Among Top 3 Issues New President Should Be Prepared to Address

There's no shortage of issues presidential candidates must be prepared to contend with if elected and a new survey shows 58 percent of Americans think that, between the two major candidates, Sen. Barack Obama will better address the current state of the housing market than Sen. John McCain (42 percent). The survey of 2,016 U.S. adults was conducted by Harris Interactive on behalf of real estate Web site is an online real estate community where homeowners, buyers, sellers, real estate agents and mortgage professionals find and share vital information about homes, for free. Read the entire survey story.



Young voters, homeless targeted in Ohio's election

By STEPHEN MAJORS – 1 day ago
Associated Press
COLUMBUS, Ohio (AP) — Democrat Barack Obama's presidential campaign blitzed bars and advocates for the homeless have lined up vans to ferry potential voters from shelters.

The prize could be thousands of traditionally elusive voters in hard-fought Ohio who would have the chance to register and vote on the same day — if the courts don't intervene.

One-stop voting, scheduled for Tuesday through Oct. 6, would be especially convenient for those Democratic-leaning voters who have traditionally had trouble getting to the polls. It's a reality not lost on two parties locked in a tight race four years after President Bush's 118,000-vote victory in Ohio gave him a second term.

Read the entire story here.

WHAT we learned last week is that the man who always puts his “country first” will take the country down with him if that’s what it takes to get to the White House.

For all the focus on Friday night’s deadlocked debate, it still can’t obscure what preceded it: When John McCain gratuitously parachuted into Washington on Thursday, he didn’t care if his grandstanding might precipitate an even deeper economic collapse. All he cared about was whether he might save his campaign. George Bush put more deliberation into invading Iraq than McCain did into his own reckless invasion of the delicate Congressional negotiations on the bailout plan.

By the time he arrived, there already was a bipartisan agreement in principle. It collapsed hours later at the meeting convened by the president in the Cabinet Room. Rather than help try to resuscitate Wall Street’s bloodied bulls, McCain was determined to be the bull in Washington’s legislative china shop, running around town and playing both sides of his divided party against Congress’s middle. Once others eventually forged a path out of the wreckage, he’d inflate, if not outright fictionalize, his own role in cleaning up the mess his mischief helped make. Or so he hoped, until his ignominious retreat.

The question is why would a man who forever advertises his own honor toy so selfishly with our national interest at a time of crisis. I’ll leave any physiological explanations to gerontologists — if they can get hold of his complete medical records — and any armchair psychoanalysis to the sundry McCain press acolytes who have sorrowfully tried to rationalize his erratic behavior this year. The other answers, all putting politics first, can be found by examining the 24 hours before he decided to “suspend” campaigning and swoop down on the Capitol to save America from the Sunnis or the Shia, or whoever perpetrated all those credit-default swaps.

Read the rest of Rich's blistering column here.

The cost of deregulation

The cost of deregulation is indeed very high --- to the U.S. taxpayer.


Bailout type Cost to taxpayers (Source: Reuters)
Proposed Treasury Department legislation $700 billion+
Bear Stearns financing $29 billion
Fannie Mae and Freddie Mac nationalization $200 billion
AIG loan and nationalization $85 billion
Federal Housing Administration housing rescue bill $300 billion
Mortgage community grants $4 billion
JPMorgan Chase repayments $87 billion
Loans to banks via Fed's Term Auction Facility $200 billion+
Loans from Depression-era Exchange Stabilization Fund $50 billion
Purchases of mortgage securities by Fannie Mae and Freddie Mac $144 billion
TOTAL $1.8 trillion+



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