Fillet of Financial Crisis

This article by Matt Taibbi in Rolling Stone does a nice job explaining the current financial crisis and its origins. It should be required reading for all citizens. He touches on my favorite theme (the GAMBLING):

He [Liddy, AIG CEO] conveniently forgot to mention that AIG had spent more than a decade systematically scheming to evade U.S. and international regulators, or that one of the causes of its "pneumonia" was making colossal, world-sinking $500 billion bets with money it didn't have, in a toxic and completely unregulated derivatives market.

Nor did anyone mention that when AIG finally got up from its seat at the Wall Street casino, broke and busted in the afterdawn light, it owed money all over town — and that a huge chunk of your taxpayer dollars in this particular bailout scam will be going to pay off the other high rollers at its table. Or that this was a casino unique among all casinos, one where middle-class taxpayers cover the bets of billionaires.

He covers the legislative pieces of the puzzles and ties it together with campaign contributions:

In 1997 and 1998, the years leading up to the passage of Phil Gramm's fateful act that gutted Glass-Steagall, the banking, brokerage and insurance industries spent $350 million on political contributions and lobbying. Gramm alone — then the chairman of the Senate Banking Committee — collected $2.6 million in only five years. The law passed 90-8 in the Senate, with the support of 38 Democrats, including some names that might surprise you: Joe Biden, John Kerry, Tom Daschle, Dick Durbin, even John Edwards.

The act helped create the too-big-to-fail financial behemoths like Citigroup, AIG and Bank of America — and in turn helped those companies slowly crush their smaller competitors, leaving the major Wall Street firms with even more money and power to lobby for further deregulatory measures.

There's lots more, so please do read. (I might recommend double-dosing on any anti-depression meds first, though.)

Dang...

I tried to give Sen. Dodd the benefit of the doubt in this discussion with Stephanie. I'd heard some of his denials and read a pretty convincing argument that this was all a right-wing character assassination of the senator. Also, the complicated ins and outs of sausage making made me want to err on the side of the Senator.

I should have known better. From the Hartford Courrant:

In an apparent change of his position, U.S. Sen. Christopher Dodd said Wednesday that he was aware of changes in legislation for a loophole that allowed highly controversial bonuses for AIG, the embattled insurance company that has received federal bailout money.

In a live interview on CNN, Dodd said, "I agreed to a modification in the legislation, reluctantly.

''Previously, Dodd had said he was not a member of the conference committee that crafted the final version of the highly complicated bill. But he had come under strong fire from Republicans and others as the person who was involved in what CNN anchor Wolf Blitzer had called a "mysterious loophole'' in the legislation.

When Blitzer asked Dodd what had changed in his understanding between Tuesday and Wednesday, Dodd replied, "Going back and reviewing it. ... I apologize if we had some confusion.''

RE: AIG political contributions

FWIW: I almost never get too riled up about that sort of thing. To me, there is a certain level of sleaze that just goes with the political territory.

Re: Dionne on Leuchtenburg

VDH had a similar thought yesterday (or over the weekend):

2) The Meltdown Commission. We had a 9/11 Commission; we formed the Baker-Hamilton Commission on Iraq (never mind the utility of the conclusions). So let us try a bipartisan investigatory commission on the autumn financial meltdown. Thus far the mainstream media narrative is a reductive “Bush did it.” But let us examine past bundling of subprime mortgages, and derivatives, and who introduced more regulation of banks, who opposed it; who tried to restrain Freddie and Fannie, who fought that tooth and nail, what the SEC did and did not do—and why. Let us collate all the campaign contributions from the failed banks, Madoff, the entire open sewer of politics and high finance, and then let those of the commission, both Democrat and Republican, issue a white paper on when, why, and how it all went down.

Dionne on Leuchtenburg

E.J. Dionne writes for The American Prospect about how he came to be a liberal. He cites the book Franklin D. Roosevelt and The New Deal: 1932-1940 by Leuchtenburg as influential in his thinking. In the piece, he notes similarities between the Depression and the current economic situation, and quotes Leuchtenburg:

You wonder if our Congress will launch a probe along the lines of the 1930s Senate investigation of Wall Street led by Ferdinand Pecora. "Pecora revealed that the most respected men on Wall Street had rigged pools, had profited by pegging bond prices artificially high, and had lined their pockets with fantastic bonuses," Leuchtenburg writes. "The bankers seemed bereft of a sense of obligation even to their own institutions."