Friday, September 19, 2008

Ooopsie V - Headline! Crisis!

Feels like 9/11 a little? Big story. Dwarfs everything. Urgent opining. The camera has learnt really to swivel at CNBC. Financial martial law declared to protect the recent plunder accumulated by the superrich. Much like demonising tort lawyers and placing caps on punitive damages. Wall Street wisdom says: we must because fear is stronger and more irrational than greed. Maybe, but whose fear and whose greed? Would be an error to underestimate the strength of the greed, utterly unchecked by fear (for good reason), driving this power-grab-amidst-the-chaos. Or the cunning. The White House has been discreetly directing intervention in the markets for years[pdf], [html] pumping up the stock prices of holders of this ponzi poison which the market - the actual market, in which function institutional investors and other rational prudent parties - in fact has been wanting to punish and chastise from the start. The Feds stepped in too to thwart any attempt by the States to slow the scam.* Business as usual, yes, but more lawless, more daring, and accelerated, because only after years of unrelieved public panic mode and the consolidation of power could today's policies be imaginable. And how easily the image pools combine...already scattered references to financial terrorists. So, a slump and panic just long enough for the latest wipeout of the riff raff and extraordinary mergers, and the bubbles will resume. Sooner than you think. The American public has a very short memory.

*Eliot Spitzer: Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye.

Let me explain: The administration accomplished this feat through an obscure federal agency called the Office of the Comptroller of the Currency (OCC). The OCC has been in existence since the Civil War. Its mission is to ensure the fiscal soundness of national banks. For 140 years, the OCC examined the books of national banks to make sure they were balanced, an important but uncontroversial function. But a few years ago, for the first time in its history, the OCC was used as a tool against consumers.

In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks. The federal government's actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules.

But the unanimous opposition of the 50 states did not deter, or even slow, the Bush administration in its goal of protecting the banks. In fact, when my office opened an investigation of possible discrimination in mortgage lending by a number of banks, the OCC filed a federal lawsuit to stop the investigation.

Throughout our battles with the OCC and the banks, the mantra of the banks and their defenders was that efforts to curb predatory lending would deny access to credit to the very consumers the states were trying to protect. But the curbs we sought on predatory and unfair lending would have in no way jeopardized access to the legitimate credit market for appropriately priced loans. Instead, they would have stopped the scourge of predatory lending practices that have resulted in countless thousands of consumers losing their homes and put our economy in a precarious position.

When history tells the story of the subprime lending crisis and recounts its devastating effects on the lives of so many innocent homeowners, the Bush administration will not be judged favorably. The tale is still unfolding, but when the dust settles, it will be judged as a willing accomplice to the lenders who went to any lengths in their quest for profits. So willing, in fact, that it used the power of the federal government in an unprecedented assault on state legislatures, as well as on state attorneys general and anyone else on the side of consumers.

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