http://online.wsj.com/article/SB122212948811465427.html

http://www.bergenjerseyforeclosures.com/blog/info/entry/repeal_of_glass_steagall_act

http://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/weill/demise.html

It was good of James to link this one in, but I agree that the references to Clinton and Iceland are a little to cute ... not to mention distracting from what is OUR problem.

The argument on CRA is that it let the genie out of the bottle, not that the volume of CRA loans caused the problem. It made extension of bad credit acceptable; and the Fannie/Freddie nexus showed loan originators the art of getting bad loans off their balance sheets. After that, like two twenty year olds in a dorm room, nature took its course.

Credit bubbles always start with the extension of bad credit. To not acknowledge CRA's role is to deny that a 10 foot diameter snowball careening down a mountain didn't start as as a six inch snowball.

......Actually it is Jim but it would take a long time to explain and I don't really feel like expending about 1000 words on the subject when there's plenty of commentary out there as you well know. The Economist did a particularly good analysis about three months ago as I recall. De-regulation and/or lax implementation of existing regs is one of the four horseman of this whole mess. The others are: Greenspan's easy money policies at the Fed; deficit spending on a huge scale which both weakened the dollar and contributed to overheating the economy; and a host of greedy but clever people in the financial industry who invented all kinds of ultimately destructive financial instruments and strategems. Obviously the latter is closely linked to a light regulatory regime. When you cut all the partisan bs, demonizing of individuals, some of whom deserve it, and mythmaking away from what's happened, it's all traceable to these four basic causes.

Gramm tries to place all blame on Democrats. There were several individuals to blame, such as Greenspan, Larry Summers, Robert Rubin, but it was Gramm that rammed the Commodity Futures Modernization Act (CFMA) of 2000 through Congress.

He put the approximate 300 page bill in a much pass appropriations bill (11,000 pages) just a few hours before a lame duck Christmas break. Most Democrats voted against the CFMA the first time through.

The CFMA was written by Wall Street attorneys. Bush appointed one of the primary authors, Walter Lukken, as a Commissioner at CFTC in 2002. Last summer, Maria Cantwell, (D-Wa) blocked Lukken's appointment as Chairman of the CFTC, which was in reaction to his no interest in finding that speculator's were manipulating oil prices.

There are strong ties between Mr. & Mrs Gramm, the Bush family, and Enron that used credit default swaps. They got energy laws changed in Texas in the early 1990s. The final thing Enron needed for their California fraud was the CFMA.

Gramm's wife, Wendy, was Chairman of the CFTC. Just one week after Clinton’s election in November 1992 Mrs. Gramm took advantage of two vacant Commissioner positions to implement rule changes to benefit Enron. A few weeks later, Enron appointed her to its Board of Directors, where she served on the Board’s Audit Committee which made her responsible for verifying Enron’s accounting procedures and other detailed financial information not available to outside analysts or shareholders. Enron paid her between $915,000 and $1.85 million in salary, attendance fees, stock option sales and dividends from 1993 to 2000. The value of her Enron stock options grew from about $15,000 in 1995 to as much as $500,000 by 2000.”

Enron spent $3.45 million in lobbying expenses in 1999 and 2000 to deregulate the trading of energy futures, among other issues. But other corporate giants such as Mobil, Exxon, BP, J.P. Morgan, Morgan Stanley, Goldman Sachs, Citibank, and Chase Manhattan, followed Enron’s lead in lobbying for deregulation. Gramm received the second largest amount of Enron's lobbying money. Texas' other Republican senator, Kay Bailey Hutchison, was the top recipient of Enron money

Several years ago, Warren Buffet called credit default swaps, "financial weapons of mass destruction."

See a very detailed December 2001 article from Public Citizen about Enron.

At least Alan Greenspan admitted he was wrong.

Deregulation and the Financial Panic
Loose money and politicized mortgages are the real villains.

It seems clear that if GLB was the problem, the crisis would have been expected to have originated in Europe where they never had Glass-Steagall requirements to begin with.

Also, the financial firms that failed in this crisis, like Lehman, were the least diversified and the ones that survived, like J.P. Morgan, were the most diversified.

Moreover, GLB didn't deregulate anything. It established the Federal Reserve as a superregulator, overseeing all Financial Services Holding Companies.

All activities of financial institutions continued to be regulated on a functional basis by the regulators that had regulated those activities prior to GLB.

Obama's assertions to the contrary, the 43rd president was the biggest regulator since Nixon.

The data also show that, adjusted for inflation, expenditures for the category of finance and banking were cut by 3 percent during the Clinton years and rose 29 percent from 2001 to 2009, making it hard to argue that Bush deregulated the financial sector.

Why do we trust these people to make things better?

Because we have no other choice. The alternative is dog eat dog and every man for himself. The last 10 years have been about as close to that state that I have seen. We pick our leaders and hope they won't let us down and try and hold their feet to the fire for that purpose. Obama is no saint, and certainly no "Messiah" as some suggest/ But I do believe he is a good man and very smart, is doing what he said during the campaign. and will hopefully do the right thing for the country as a whole, in spite of the many pressures to stray into rank ideology. What conservatives have a difficulty doing imo, is stepping back and looking at their ideology on economics for being locked only into excessive promotion on the supply side of the model. That ties into the anti-reg movement we've been operating under for so long, and now maybe it's time to bolster the demand side to equal things out some. That is what Obama is trying to do imo, in an almost desperate economic state he inherited. I don't agree with everything he's doing, and nobody has a crystal ball, but I do think it will take bold action and we are certainly seeing that.

And I believe you were an honest trader, sorry for the snark on that.

There was a Salomon trader named Paul Moser who brought down the firm by his arrogance. He accused me of stealing through my brokerage activities over a lunch I had with him. I almost went over the table at him. I didn't cheat; but there was plenty of it at the MERC. This may sound like some BS story. So be it. I could give you the name of the Salomon employee who trusted me with the floor brokerage for verification, but I'm not interested in that. I am trying to establish the fact that the arrogance which existed on Wall Street, aided and abetted by the Fed, by politicians in DC who stood to benefit, and any other sleazy people involved, contributed to this meltdown.

The problem is much larger than you suggest; neither left nor right. The problem is greedy capitalists, unchecked by greedy politicians, with the rest of us having to pay to let them off the hook.

The CRA is just another symptom of arrogant politicians establishing faulty policy, based on trying to satisfy a voting bloc. Well intentioned in the press release, but neither means tested nor monitored.

Why do we trust these people to make things better?

And they intervened with the CRA,

(pete, I am not picking on you)

the CRA apparently had very little to do with the present mess. From this:
Only six percent of the subprime loans made by CRA-covered lenders went “to lower-income borrowers or neighborhoods.” It was non-bank mortgage companies — not covered by CRA — that originated 50 percent of subprime loans.
In other words, it was the promise of easy money that got us into this mess, and as my dear old daddy always said, "If it sounds too good to be true... It probably is."

Follow the link, and all the links therein, don't self censure, read them. I don't know, but I am waiting for actual facts that actually contradict... not talking points based on mere idealogy.

I agree that this whole thing spiraled out of control. But why do so many people believe govt. will do a better job of managing the economy? There is no incentive to do so. Govt screws up; they raise taxes.

Your first statement; I don't believe. People have ceded their personal responsibility to govt. It's easier. You are former military-I am former military. What did we learn? It is not what is driving the attitudes of this country.

I don't think anyone wants to see government get any more involved in private business, any more than is necessary to prevent what is happening now. The Glass/Staegal act had worked well since the GD in maintaining excesses in greed. I doubt Graham is solely to blame for destroying the economy. That is Hyperbole IMO. But the fact remains, that many believe repealing that law, and other checks, lit the fuse that led us to our current severe problems, beyond normal downturns or normal bubbles that break. In other words, there is a balance to be maintained between gov regulation and excessive gov interference in the market place, and the pendulum swung to far to deregulation imo, and now has to be re-calibrated. And Fanny Mae existing didn't cause the problem, it was their management that took advantage of Grahams 2000 bill and jumped into the derivatives gambling game, dubious subprime loans, and credit/default swaps stuff. Hopefully, Obama will get it right.