Will Republicans stand with Wall Street?

For now, Senate Republicans are standing united against Wall Street reform, demanding more negotiations. Democrats should be leery of that tactic since it’s the same one the GOP used on health care reform.
Did Republicans use the delay on health care to negotiate in good faith? Nope. Instead, they used it to whip up opposition to the measures.
Democrats should push ahead with stricter oversight on financial firms. They have the momentum on this issue:

But compared with congressional Republicans, Obama has a clear advantage. A slim majority – 52 percent – of all Americans says they trust Obama over the GOP on the issue, while 35 percent favor the Republicans in Congress. Independents prefer Obama 47 to 35 percent, with 16 percent trusting neither side on the issue.

In the poll, most Democrats back each of the three major elements of the reform legislation and most Republicans oppose them, echoing the congressional showdown expected this week.

The area with the highest levels of cross-party support is on more robust federal oversight of the way banks and other financial companies make consumer loans, such as auto loans, credit cards and mortgages. Here, 44 percent of Republicans approve of stricter guidelines, joining 75 percent of Democrats and 57 percent of independents on the issue.

In this poll, support for new federal regulation was about the same for “banks and other financial institutions” as for “Wall Street firms.” A recent Gallup poll taken before Obama took his case for reform to New York last week showed somewhat greater support for new laws aimed at Wall Street, suggesting the phrase had become a pejorative.

78 comments Add your comment

Union

April 26th, 2010
1:07 pm

Goldman wants reform.. so what’s the problem? (they stand to make more money with the democratic reform policies)

Peadawg

April 26th, 2010
1:13 pm

“Will Republicans stand with Wall Street?”

Obama did when he was taking campaign contributions from them.

Kamchak

April 26th, 2010
1:16 pm

Fannie, Freddie, CRA, Acorn—they are the ones responsible for this mess. :roll:

Just thought I would get that out of the way early.

Sick&Tired

April 26th, 2010
1:20 pm

Yes, the republicans and their constituents will stand with Wall Street. However, most live on Main Street with a sweet dream of being like the guys on Wall Street.

pat phelps

April 26th, 2010
1:21 pm

Thanks Kamchak – they are the blame, along with Barney Frank and Christopher Dodd. All are guilty of forcing subprime loans down the throats of the industry. President Bush is just as guilty for not reeling in these idiots running Fannie and Freddie.

James

April 26th, 2010
1:26 pm

Kamchak- it took a number of individuals and institutions to accomplish such a mess (Fannie Freddie CRA Acorn, Congress, GS, BStearns, Citi, etc) Somel just flail around defending their chosen group for some inane reason- I assume you have yours.

Tommy Maddox

April 26th, 2010
1:27 pm

Kamchak must have gotten saved yesterday at church!

Scout

April 26th, 2010
1:32 pm

The backlash is commmmminnng !

Granny Godzilla

April 26th, 2010
1:35 pm

Sadly yes, some will.

Kamchak

sometimes “teh stoopid” makes me chuckle

Kamchak

April 26th, 2010
1:39 pm

All are guilty of forcing subprime loans down the throats of the industry.

Nope. Fannie and Freddie don’t make loans nor do they dictate who gets loans, they are in the business of securitization. During the height of the sub-prime boom, they went from holding a high of 48% of the sub-prime loans sold into the secondary market to 24%.

84% of the sub-prime loans were made by private mortgage companies not subject to the rules of the CRA.

Kamchak

April 26th, 2010
1:42 pm

Granny Godzilla

I thought the eye roll thingy would express my sarcasm.

ctucker

April 26th, 2010
1:44 pm

James, The meltdown went global because of Wall Street and its deriatives. Individual homeowners couldn’t have caused that kind of mess. And ACORN had nothing to do with it

ctucker

April 26th, 2010
1:44 pm

Kamchak, Ha ha

Kamchak

April 26th, 2010
1:49 pm

Ms. Tucker

Good job at the round table on the TeeVee yesterday.

Union

April 26th, 2010
1:50 pm

I cannot imagine the democrats taking millions and millions from Unions would have ANY effect on decisions made by the politicians. So.. when we have a meltdown from unfunded pensions.. brought to us by unions.. (and democrats) will that be a wall street issue as well?

Granny Godzilla

April 26th, 2010
1:53 pm

melt down from unfunded pensions……there’s your sign

TGT

April 26th, 2010
1:56 pm

Will Republicans stand with Wall Street?

Not sure about that, but one thing is certain, Democrats don’t have as big a problem with “Wall Street” (or at lest its money) as they would haave us believe. As I noted on Bookman’s blog last week: According to this from Open Secrets, the big money from large corporations OVERWHELMINGLY goes to Democrats over Republicans. And notice who is #65 on the list, tilting “Strongly Democratic.”

Ragnar Danneskjöld

April 26th, 2010
2:01 pm

Neither good judgment, nor a history of economic failures in every initiative since 2007, should prevent the democrats from imposing their uninformed arbitrary will on the economy. Seemingly the democrats blame the instrument – “derivatives,” an idea beyond the comprehension of 98% of leftists – rather than the underlying causes for the current distress. Nothing new there.

If democrats were intellectually serious, they would look at “causation,” rather than “means.” I hope the republicans do better, but without a strong conservative presence in Washington I doubt that we will see any rational approach to prevent similar future bubbles.

PearlJam

April 26th, 2010
2:12 pm

Union – You are correct.

What a joke, 1/2 of the Repulican’s are in with it so I’m not blaming one party over the other.

Union

April 26th, 2010
2:14 pm

Granny Godzilla
April 26th, 2010
1:53 pm

“melt down from unfunded pensions……there’s your sign”

oh gee.. giggle. giggle.. you made a funny.. I sure haven’t seen that little come back anywhere before.. you are just so witty.. wow

Just because you can type.. doesn’t mean you should.. This might be more than you can comprehend.. cause its really big numbers.. . City of LA.. starting out this year.. over $500 million in unfunded pensions.. by 2015 it will be over $1 Billion.. It cannot pay what it owes now and it’s on it 5th highest revenue generating fiscal year. unlike obama.. they cannot just fire up the presses and tell the morons that we have plenty of money cause xerox is making it..

PearlJam

April 26th, 2010
2:17 pm

The bill is a Democrat Part fundraiser, Why should the Republicans help, but they will, as they will still get a little piece of the pie.

Kamchak

April 26th, 2010
2:19 pm

Tommy Maddox

April 26th, 2010
2:19 pm

Why should the Repubs consent to more government control?

ctucker

April 26th, 2010
2:19 pm

Ragnar, Derivatives were a major cause. Even Alan Greenspan, another Ayn Rand acolyte, agrees

ctucker

April 26th, 2010
2:20 pm

Tommy Maddox, They should consent so we won’t have another financial cataclysm

I Report/You Decide

April 26th, 2010
2:21 pm

When Obama funneled hundreds of millions of taxpayer-funded bailout dollars to failed banks, would that count as “standing with Wall Street?”

Or, let me illustrate it differently…none of the failed Wall Street institutions cost me as much as one nickel, but the federal government bent me over to the tune of about $25,000 last year.

Tommy Maddox

April 26th, 2010
2:23 pm

Spend spend spend.

There’s your financial cataclysm.

Union

April 26th, 2010
2:24 pm

I Report/You Decide
April 26th, 2010
2:21 pm

Yeah.. but you got road and stuff..

I Report/You Decide

April 26th, 2010
2:24 pm

If Obama were really worried about a “financial cataclysm,” why not let the failed banks fail, and use the bailout money instead to aid responsibly-managed institutions with picking up the slack in the market?

Could it have anything to do with the millions of $$$ contributed by Goldman Sachs officers to Obama’s campaign coffers?

Union

April 26th, 2010
2:25 pm

@ctucker.. I don’t think the question should be about the republicans standing with wall street.. should be more about do you really want those morons in Washington passing another bill that no one up there read or understands?

Chris Broe

April 26th, 2010
2:26 pm

If someone thinks they can pull it off, then by all means, explain the meltdown’s causes and possible preventions. We’re all ears. (twitter length please)

And don’t forget to include a reason why the reform package is a bad idea.

and save your ideology for your manifesto, Unishmoe.

Cynthia was marvelous on ABC’s This Morning yesterday. I wonder if she would care to do a few words describing what George Wills (another one of my heroes) is like in real life?

Granny Godzilla

April 26th, 2010
2:27 pm

Union

Well, well,

Unions negotiated in good faith with the government for those pensions.
Who is responsible for the fact that they are unfunded?

I Report/You Decide

April 26th, 2010
2:28 pm

Union @ 2:24 –

Can’t tell if you are being sarcastic or not, but…

Whenever anyone complains about taxes, the typicla liberal retort is “we must have infrastructure”…which is great, except that infrastructure counts for about 2% of the federal budget, and it’s not what conservatives take issue with anyway…it’s government waste and income re-distribution…

…and liberals are opposed to roads anyway…

PearlJam

April 26th, 2010
2:30 pm

Here is good info I found on causes, Keep in mind the deregulation was due to Washington & Wall Streets marriage:

Here are 12 deregulatory steps to financial meltdown:

1. The repeal of Glass-Steagall

The Financial Services Modernization Act of 1999 formally repealed the Glass-Steagall Act of 1933 and related rules, which prohibited banks from offering investment, commercial banking, and insurance services. In 1998, Citibank and Travelers Group merged on the expectation that Glass-Steagall would be repealed. Then they set out, successfully, to make it so. The subsequent result was the infusion of the investment bank speculative culture into the world of commercial banking. The 1999 repeal of Glass-Steagall helped create the conditions in which banks invested monies from checking and savings accounts into creative financial instruments such as mortgage-backed securities and credit default swaps, investment gambles that led many of the banks to ruin and rocked the financial markets in 2008.

2. Off-the-books accounting for banks

Holding assets off the balance sheet generally allows companies to avoid disclosing “toxic” or money-losing assets to investors in order to make the company appear more valuable than it is. Accounting rules — lobbied for by big banks — permitted the accounting fictions that continue to obscure banks’ actual condition.

3. CFTC blocked from regulating derivatives

Financial derivatives are unregulated. By all accounts this has been a disaster, as Warren Buffett’s warning that they represent “weapons of mass financial destruction” has proven prescient — they have amplified the financial crisis far beyond the unavoidable troubles connected to the popping of the housing bubble. During the Clinton administration, the Commodity Futures Trading Commission (CFTC) sought to exert regulatory control over financial derivatives, but the agency was quashed by opposition from Robert Rubin and Fed Chair Alan Greenspan.

4. Formal financial derivative deregulation: the Commodities Futures Modernization Act

The deregulation — or non-regulation — of financial derivatives was sealed in 2000, with the Commodities Futures Modernization Act. Its passage orchestrated by the industry-friendly Senator Phil Gramm, the Act prohibits the CFTC from regulating financial derivatives.

5. SEC removes capital limits on investment banks and the voluntary regulation regime

In 1975, the Securities and Exchange Commission (SEC) promulgated a rule requiring investment banks to maintain a debt to-net capital ratio of less than 15 to 1. In simpler terms, this limited the amount of borrowed money the investment banks could use. In 2004, however, the SEC succumbed to a push from the big investment banks — led by Goldman Sachs, and its then-chair, Henry Paulson — and authorized investment banks to develop net capital requirements based on their own risk assessment models. With this new freedom, investment banks pushed ratios to as high as 40 to 1. This super-leverage not only made the investment banks more vulnerable when the housing bubble popped, it enabled the banks to create a more tangled mess of derivative investments — so that their individual failures, or the potential of failure, became systemic crises.

6. Basel II weakening of capital reserve requirements for banks

Rules adopted by global bank regulators — known as Basel II, and heavily influenced by the banks themselves — would let commercial banks rely on their own internal risk-assessment models (exactly the same approach as the SEC took for investment banks). Luckily, technical challenges and intra-industry disputes about Basel II have delayed implementation — hopefully permanently — of the regulatory scheme.

7. No predatory lending enforcement

Even in a deregulated environment, the banking regulators retained authority to crack down on predatory lending abuses. Such enforcement activity would have protected homeowners, and lessened though not prevented the current financial crisis. But the regulators sat on their hands. The Federal Reserve took three formal actions against subprime lenders from 2002 to 2007. 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.

8. Federal preemption of state enforcement against predatory lending

When the states sought to fill the vacuum created by federal non-enforcement of consumer protection laws against predatory lenders, the Feds — responding to commercial bank petitions — jumped to attention to stop them. The Office of the Comptroller of the Currency and the Office of Thrift Supervision each prohibited states from enforcing consumer protection rules against nationally chartered banks.

9. Blocking the courthouse doors: Assignee Liability Escape

Under the doctrine of “assignee liability,” anyone profiting from predatory lending practices should be held financially accountable, including Wall Street investors who bought bundles of mortgages (even if the investors had no role in abuses committed by mortgage originators). With some limited exceptions, however, assignee liability does not apply to mortgage loans, however. Representative Bob Ney — a great friend of financial interests, and who subsequently went to prison in connection with the Abramoff scandal — worked hard, and successfully, to ensure this effective immunity was maintained.

10. Fannie and Freddie enter subprime

At the peak of the housing boom, Fannie Mae and Freddie Mac were dominant purchasers in the subprime secondary market. The Government-Sponsored Enterprises were followers, not leaders, but they did end up taking on substantial subprime assets — at least $57 billion. The purchase of subprime assets was a break from prior practice, justified by theories of expanded access to homeownership for low-income families and rationalized by mathematical models allegedly able to identify and assess risk to newer levels of precision. In fact, the motivation was the for-profit nature of the institutions and their particular executive incentive schemes. Massive lobbying — including especially but not only of Democratic friends of the institutions — enabled them to divert from their traditional exclusive focus on prime loans.

Fannie and Freddie are not responsible for the financial crisis. They are responsible for their own demise, and the resultant massive taxpayer liability.

11. Merger mania

The effective abandonment of antitrust and related regulatory principles over the last two decades has enabled a remarkable concentration in the banking sector, even in advance of recent moves to combine firms as a means to preserve the functioning of the financial system. The megabanks achieved too-big-to-fail status. While this should have meant they be treated as public utilities requiring heightened regulation and risk control, other deregulatory maneuvers (including repeal of Glass-Steagall) enabled them to combine size, explicit and implicit federal guarantees, and reckless high-risk investments.

12. Credit rating agency failure

With Wall Street packaging mortgage loans into pools of securitized assets and then slicing them into tranches, the resultant financial instruments were attractive to many buyers because they promised high returns. But pension funds and other investors could only enter the game if the securities were highly rated.

The credit rating agencies enabled these investors to enter the game, by attaching high ratings to securities that actually were high risk — as subsequent events have revealed. The credit rating agencies have a bias to offering favorable ratings to new instruments because of their complex relationships with issuers, and their desire to maintain and obtain other business dealings with issuers.

This institutional failure and conflict of interest might and should have been forestalled by the SEC, but the Credit Rating Agencies Reform Act of 2006 gave the SEC insufficient oversight authority. In fact, the SEC must give an approval rating to credit ratings agencies if they are adhering to their own standards — even if the SEC knows those standards to be flawed.

From a financial regulatory standpoint, what should be done going forward? The first step is certainly to undo what Wall Street has wrought. More in future columns on an affirmative agenda to restrain the financial sector.

None of this will be easy, however. Wall Street may be disgraced, but it is not prostrate. Financial sector lobbyists continue to roam the halls of Congress, former Wall Street executives have high positions in the Obama administration, and financial sector propagandists continue to warn of the dangers of interfering with “financial innovation.”

Granny Godzilla

April 26th, 2010
2:31 pm

I Report/You Decide

April 26th, 2010
2:37 pm

The meltdown is actually very simple to explain. It was a perfect storm of the following;

1) Idiots buying houses they couldn’t afford, thus borrowing money they could never repay.

2) The idiot bankers who lent money to people with low incomes and no money down, who therefore had no incentive not to walk away and leave the banks holding the bag.

3) Skyrocketing gasoline prices due to a hurricane-induced temporary shortage.

You can argue that the federal government facilitated all three events, as follows;

1) Convincing voters that home ownership is a right, regardless of whether you have demonstrated good judgment by saving up for a down payment, building good credit, stable job history, etc.

2) Fannie Mae/Freddie Mac encouraging and guaranteeing these crappy loans described above.

3) Blocking any new domestic oil exploration and/or development of any new domestic oil refining capacity.

Pablo

April 26th, 2010
2:42 pm

The problem, more than anything, is “leaders” that want to pass laws before anyone can see what’s in them. These are the same individuals complaining about the ‘culture of corruption’ that the republicans had when they were in power… If you ask me, I have more confidence in Wall Street (warts and all) than in the current congress.

The Carnivore

April 26th, 2010
2:46 pm

You don’t assign most of the blame to the individual borrowers? No one made them sign up for these types of loans. Have you ever thought that not all Americans are smart enough to own a home? Home ownership is certainly not for everyone. The only reason the derivatives went bad is because so many of them were toxic loans to start with. Wall Street did aggregate them and sell them off in pieces, but it is up to the buyers (other major banks) to look at what they are buying. Nobody did any due diligence after they got rolled up.

There is a reason that banks always made everyone put down 20% up front. The CRA was, and is, a terrible idea that took 30 years to blow up, but blow up it did.

Union

April 26th, 2010
2:48 pm

@ctucker… I don’t see a bad word in my comment.. why is it still moderated?

I Report/You Decide

April 26th, 2010
2:52 pm

The great thing about this topic is that Cynthis Tucker is (unwittingly) admitting that trickle down economics works. If a bank fails, it doesn’t hurt a homeowner who is current on his or her mortgage. Someone just steps in and buys that asset (the mortgage) from the failed lender, the homeowner keeps making payments, and all is well with the world.

The only people hurt when a bank fails are the investors…and they should be hurt, given that they invested in a poorly managed financial institution, or invested in a failed financial instrument or “deriviative.” But, we know that, according to liberals, only “the wealthy” invest in things like the stock market, or banks, or mortgage derivatives, or whatever. So, to assert that these failures resulted in a “financial cataclysm” is to basically stipulate that when wealthy investors suffer losses, the trickle down effect has a great negative impact on the entire economy.

No homeowner lost his or her house and/or got foreclosed because of banking failure. Regardless of the financial status of your lender, if you make the payments, it’s your house, and you’re fine.

I Report/You Decide

April 26th, 2010
2:54 pm

“@ctucker… I don’t see a bad word in my comment.. why is it still moderated?”

Because you are too effective at refuting her position.

Tommy Maddox

April 26th, 2010
3:00 pm

Oh and Granny, the arrogare make us laugh too.

Granny Godzilla

April 26th, 2010
3:05 pm

arrogare: to claim in Italian……

TnGelding

April 26th, 2010
3:06 pm

Yes they will! And the Democrats as well. We want to be careful not to over do it. The markets are in the middle of a nice rally. Most of us are invested one way or another.

Kamchak

April 26th, 2010
3:07 pm

Fannie, Freddie, CRA, ACORN—SQUIRREL!

TnGelding

April 26th, 2010
3:10 pm

Force the derivatives to liquidate in an orderly manner. Otherwise it will be more of the same later. Any new regulations will be ineffective because the lawyers on Wall Street are much smarter than the ones in Washington. And paid considerably better, too.

TnGelding

April 26th, 2010
3:12 pm

Kamchak

April 26th, 2010
3:07 pm

Squirrelly!

Michael K.

April 26th, 2010
3:13 pm

Cynthi had a somewhat similar post on Friday and, once again, she’s unfairly demonizing Republicans over an issue that she doesn’t really seem to understand. Just as opposing Obamacare was not the equivalent of endorsing the status quo, opposing the Dodd bill is not the equivalent of “standing with Wall Street.” The main culprit in the financial crisis was government. Between Fannie and Freddie’s relentless drive to buy up subprime RMBS, to tax policies designed to favor home ownership over renting, and easy money from the Fed the government was easily the most culpable party in creating the housing asset bubble. Ironically, Barney Frank and Chris Dodd are two of the people most responsible for the crisis and, yet, they are the ones proposing how to “fix” the system.

Given the government seems to be adicted to bailing out large corporations, I would actually agree with the Volcker/ Mervyn King rule – banks that are too big to fail are simply too big. Breaking up the big banks would probably be a good idea. Second, the government needs to get out of the housing business. Were it not for government policies that relentlessly push individuals to buy homes, the bubble would never have expanded to the size that it did.

What we don’t need is for yet another faceless bureaucracy to have sweeping, but ill-defined, powers to interfere with the normal functioning of the financial system. That’s what the Dodd bill does and that’s a bad idea.

Granny Godzilla

April 26th, 2010
3:17 pm

Michael K

Then you support the Kaufman Brown amendment?

Union

April 26th, 2010
3:23 pm

@ Granny.. I cannot argue with you right now.. :) my post is awaiting moderation.. talk about fighting with both arms behind your back