Re: [asa] Deregulation Madness was Re: Ben Stein on Sub Prime Mortage Crisis...

From: John Walley <>
Date: Sun Dec 07 2008 - 23:17:46 EST

But wouldn't the Community Reinvestment Act (CRA) be an example of gov't regulation rather than the dreaded deregulation? Wouldn't the sub-prime issue been avoided if not for this gov't interference in the market?



--- On Sun, 12/7/08, Rich Blinne <> wrote:

> From: Rich Blinne <>
> Subject: [asa] Deregulation Madness was Re: Ben Stein on Sub Prime Mortage Crisis...
> To: "Lynn Walker" <>, "George Murphy" <>, "Randy Isaac" <>
> Cc: "John Walley" <>, "AmericanScientificAffiliation" <>
> Date: Sunday, December 7, 2008, 10:56 PM
> On Dec 7, 2008, at 6:53 PM, Lynn Walker wrote:
> >
> >
> > On Sun, Dec 7, 2008 at 7:26 PM, John Walley
> <> wrote:
> >
> > See Ben Stein dismiss the mortgage crisis and hype the
> financial sector last year in this video 4:28 and 6:30. In
> case there was any doubt about him being a buffoon before
> this out to clench it.
> >
> > John
> >
> >
> >
> > Speaking of real buffoons:
> >
> > They were warned.
> >
> > Who's responsible?
> >
> > In their own words.
> >
> > Lynn
> In defense of Ben Stein, he has learned from some of his
> mistakes, namely that deregulation has been a collosal
> failure. First some history of the deregulation disaster
> promoted by both parties in the last decade, albeit mostly
> by one.
> The Commodity Futures Modernization Act of 2000 did at
> least two things. It allowed the now infamous credit default
> swaps to be sold in so-called "dark markets" and
> it also introduced the so-called Enron Loophole. Back in
> 2002 McCain was the only member of his party who voted for
> cloture on the Feinstein amendment that would regulate the
> energy market. Phil Gramm voted the other way. What happened
> to this John McCain? In 2005, Gramm joined his campaign as
> an economic advisor.
> > The New York Times in 2002 chronicled Gramm's
> shepherding of the Commodity Futures Modernization Act which
> was part of an omnibus spending bill.
> > On. Sept. 14, 2000, before the House vote, Mr. Lay
> wrote to important House members, including Speaker J.
> Dennis Hastert, urging enactment of the bill. Mr. Lay's
> letter told lawmakers that ''this important
> legislation provides critical legal certainty for a range of
> transactions that are a central part of Enron's risk
> management and commodity trading business.''
> >
> > Enron's interest was twofold, officials said. One
> was ensuring regulatory freedom for Enron Online, a
> so-called bilateral platform, in which Enron was the other
> party at the end of every transaction. Enron also wanted
> minimal oversight over another trading form that could
> become part of its future business, multilateral platforms,
> where many parties traded. In the end, the bill totally
> exempted bilateral platforms and partially exempted
> multilateral platforms, a compromise Mr. Lay supported in
> his letter.
> >
> > ...
> > But in the Senate, the bill faced a formidable
> roadblock in Mr. Gramm. The Banking Committee, of which Mr.
> Gramm was chairman, was one of the panels with jurisdiction
> over the bill, but the Agriculture Committee handled the
> section containing the energy exemption. When Congress went
> into recess in October for the elections, the bill's
> supporters thought it was dead.
> >
> > ''Gramm's hold was everything,''
> said one person involved in drafting the bill.
> >
> > Mr. Neal, Mr. Gramm's press secretary, said,
> ''Senator Gramm held the bill from September through
> Dec. 13, when an agreement with Treasury Secretary Larry
> Summers was reached on the banking issues'' that had
> prompted the hold. One of Mr. Gramm's concerns was a
> clear line of jurisdiction between bank regulators and the
> commission over financial products that could be developed
> by banks and other financial institutions.
> >
> > As for the energy provision, Senator Gramm
> ''did not write, negotiate or modify'' it,
> Mr. Neal said. On the question of Mr. Lay's concerns
> about the bill, Mr. Neal said Senator Gramm was aware of Mr.
> Lay's letter to Mr. Hastert.
> As for Gramm's lack of knowledge, that was contradicted
> by an Enron internal e-mail. Note why Gramm blocked it above
> (in bold according to his press secretary) and the reference
> to it in the e-mail below.
> > CFTC Reauthorization
> > From: Steven Kean
> > To: Chris Long , Richard Shapiro
> > Sent: 14/08/2000 at 09:54
> > Please go ahead with preparation of the talking
> points. I'll give Ken a heads up.
> > ---------------------- Forwarded by Steven J
> Kean/HOU/EES on 08/14/2000 08:52 AM
> ---------------------------
> > Richard Shapiro
> > 08/10/2000 06:11 PM
> > To: Steven J Kean/HOU/EES@EES
> > cc: Chris Long/Corp/Enron@ENRON
> > Subject: CFTC Reauthorization
> > I agree w/ chris's recommendation- you too?
> > ---------------------- Forwarded by Richard
> Shapiro/HOU/EES on 08/10/2000 06:10 PM
> ---------------------------
> > Chris Long@ENRON
> > 08/10/2000 05:12 PM
> > To: Mark E Haedicke/HOU/ECT@ECT, Steven J
> Kean/HOU/EES@EES, Richard
> > Shapiro/HOU/EES@EES, Mark Taylor/HOU/ECT@ECT, Joe
> Hillings/Corp/Enron@ENRON,
> > Cynthia Sandherr/Corp/Enron@ENRON, Tom
> Briggs/NA/Enron@Enron
> > cc:, Allison
> Navin/Corp/Enron@ENRON
> >
> > Subject: CFTC Reauthorization
> >
> > At his request, I met Lee Sachs, Assistant Treasury
> Secretary, who had requested the meeting after a brief
> conversation recently. Lee said that senior-level
> negotiations led by Secretary Summers were initiated last
> week between the CFTC and SEC and that progress was being
> made on the single stock futures issue (the major issue
> postponing movement of the legislation).
> >
> > As you know, the House completed committee work on HR
> 4541 before it recessed. The bill will now is pending before
> the Rules Committee where differences will be worked out
> between the three different Committee versions (Agriculture,
> Commerce, and Banking). The Senate Agriculture Committee
> passed out the Senate version in July. However, the bill is
> not moving quickly in the Senate due to Senator Phil
> Gramm's desire to see significant changes made to the
> legislation (not directly related to our energy language).
> Last week at the R epublican Convention, I asked the Senator
> about the bill and he said they were working on it, but much
> needs to be changed for his support. More telling perhaps,
> were Wendy Gramm's comments that she would rather the
> current bill die if a better bill can be passed next year.
> What this means is that we must, at the least, remove
> Senator Gramm's opposition to the bill to move the
> process and more importantly seek to gain his support of the
> legislation.
> >
> > Lee Sachs message was just that. I told Lee that we
> shared his desire to move the legislation as long as it
> contains a full exclusion for all non-agriculture
> commodities (including metals). He said that we would have a
> difficult time defending the metals provision politically.
> But, Lee said "we would not find Treasury opposition
> to the House Commerce Committee language" (which
> includes favourable language on energy and metals). This is
> a positive development, because it isolates the CFTC from
> its key defenders and I hope ensures no veto threat on our
> issues. However, I do not expect Treasury to be vocal in
> support of our position. It is clear that Congressional
> leaders and the Administration want to get this bill done
> this year and there remains a good opportunity for
> enactment.
> >
> > However, with less than 20 or so legislative days
> left, we need Senator Gramm to engage. A call from Ken Lay
> in the next two weeks to Senator Gramm could be an impetus
> for Gramm to move his staff to resolve the differences.
> Gramm needs to fully understand how helpful the bill is to
> Enron. Let me know your thoughts on this approach. I am
> prepared to assist in coordinating the call and drafting the
> talking points for a Ken Lay/Sen. Gramm call.
> But what does this have to do with McCain? Note this
> February piece in Fortune that asks that very question:
> > Now that the faltering economy has replaced national
> security as the overriding issue in the presidential
> campaign, John McCain is portraying himself as a
> budget-shrinking, flat-tax-embracing, healthcare-privatizing
> champion of free markets. But is this Reaganesque zealot the
> real John McCain?
> >
> > The big question is whether McCain's radical
> agenda is simply designed to rally the R epublican base, or
> would prove a blueprint for a McCain presidency. Given the
> Arizona Senator's maverick record, voters have every
> reason to distrust the new McCain. ...
> >
> > But economic conservatives should take heart.
> McCain's chief economic adviser - and perhaps his
> closest political friend - is the ultimate pure play in free
> market faith, former Texas Senator Phil Gramm. If McCain
> follows Gramm's counsel, and most of his current
> positions are vintage Gramm indeed ...
> So, which was the real John McCain? The free market true
> believer of the primary or the maverick of the general
> election? We do have a test and that's the farm bill
> from May.
> Note Jason Leopold's commentary about the linkage
> between his opposition to it and his anti-regulatory views
> of 2008.
> > A McCain aide told me that the Arizona senator opposes
> the farm bill because it “rewards lobbyists” by granting
> rich farmers lucrative subsidies, although he would support
> “a reasonable level of assistance and risk management to
> farmers when they need America's help.”
> >
> > But the aide, who spoke on condition of anonymity,
> acknowledged that the presumptive R epublican presidential
> nominee also opposes the farm bill because Gramm advised
> McCain that he should resist its regulatory language on the
> energy futures market.
> The Enron debacle was caused by the same kind of
> deregulation that is killing our economy today. Both
> incidents were caused by the very same bill promoted by Phil
> Gramm. Phil Gramm is also author of Gramm Leach Bliley which
> established the investment banks without the reserve
> requirements of commercial banks. It is true that much blame
> to go around because both parties promoted deregulation.
> The real question have people learned from their mistakes.
> The answer except for a rapidly dwindling group of people is
> yes. In a recent NY Times op ed Ben Stein noted that a
> number of people who in his opinion who were too close to
> the deregulatory mistakes of the past:
> > [Geithner’s] the pre-eminent careerist of old-time
> finance, and a basic part of the team that got us into this
> mess. He was pro-deregulation for most of his career.
> However last June Geithner learned his lesson:
> > Geithner also said the current financial crisis has
> demonstrated that U.S. regulation needs substantial reform
> from its current confusing mix.
> >
> > The reforms should be accompanied by global
> initiatives to make the financial architecture stronger
> across borders and better able to respond to crises that
> affect financial institutions far and wide, he said.
> >
> > "The most fundamental reform that is necessary is
> for all institutions that play a central role in money and
> funding markets -- including the major globally active banks
> and investment banks -- to operate under a unified framework
> that provides a stronger form of consolidated supervision,
> with appropriate requirements for capital and
> liquidity," Geithner said in his prepared remarks.
> >
> Barney Frank said this in July:
> > It's really been a test of regulation...and
> conscious decision brought by Alan Greenspan, who is the
> arch de-regulator. Because in 1994, not coincidently the
> last time the D emocrats had a congressional majority before
> this year, a bill was passed that was called the Home Owner
> Equity Protection Act, that said to the Federal Reserve,
> 'Look, we know have loans being made by non-regulated
> entities so please pass some rules. We give you the
> statutory authority to pass the rules to contain their
> activity and make it more responsible'. Alan Greenspan
> said, 'oh no, that's interfering with the market, I
> can't do that.' He didn't do it; that's
> where the crisis came. Fed Chair Ben Bernanke, to his
> credit, on Monday of this week finally used that authority,
> but if Greenspan had done 10 years ago what Bernanke did on
> Monday, we wouldn't be in nearly as bad as a situation.
> >
> The bottom line is the deregulation madness that caused
> this recession/depression is over and most people now are
> not like Phil "mental recession" Gramm. John
> McCain stressed his "born again" regulation
> position during the general election. Chris Cox, the current
> chairman of the SEC, wrote an op-ed in the NY Times stating
> that self-regulation was a dismal failure. Alan Greenspan
> stated last month that he made a "mistake" with
> respect letting companies regulate themselves.
> > “Do you feel that your ideology pushed you to make
> decisions that you wish you had not made?”
> >
> > Mr. Greenspan conceded: “Yes, I’ve found a flaw. I
> don’t know how significant or permanent it is. But I’ve
> been very distressed by that fact.”
> >
> > He continued, “The evidence strongly suggests that
> without the excess demand from [the unregulated]
> securitizers, subprime mortgage originations would have been
> far smaller and defaults accordingly far lower."
> Even of all people Ben Stein has learned, but have the
> disciples of deregulation followed his lead? The parallels
> with the 1930s are uncanny, particularly the dismantling of
> the regulatory protections of the 1930s that have been
> systematically been eliminated since the 1980s. As I have
> said before this is the same deregulation madness that is
> behind climate change denialism. Whether it's the
> climate or the economy, deregulation equals destruction.
> Rich Blinne
> Member ASA


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Received on Sun Dec 7 23:18:24 2008

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