On Sep 17, 3:31 pm, "Rod Speed"
gmail.com> wrote:> Immortalist
yahoo.com> wrote:>
>> ...NOMI PRINS: The bailout of AIG is an example of the government
>> having to step in and clean up a mess. It is not so much that subprime
>> mortgages fell and that caused some losses to AIG. AIG was acting not
>> simply as an insurance company; it was acting as a speculative
>> investment bank/hedge fund, as was Bear Stearns, as was Lehman
>> Brothers, as is what will become Bank of America/Merrill Lynch. So you
>> have a situation where it’s bailing out not just the money, but taking
>> on the risk of items it cannot even begin to understand, because if it
>> had understood them, this would never have gotten to the point to
>> which it has gotten.
>
>> AMY GOODMAN: How did it get to this point? How did it go beyond
>> insurance?
>
>> NOMI PRINS: In AIG and in Lehman and with Merrill and every other
>> company on Wall Street that has faltered or is faltering, it’s about
>> taking on too much leverage and borrowing to take on the risk and
>> borrowing again and borrowing again, twenty-five to thirty times the
>> amount of capital, the amount of money that they had to basically back
>> the borrowing that they were doing. Human regular borrowers cannot do
>> this. This is something that is an item only of the banking industry.
>
>> And not only was all that borrowing happening, but there was no
>> transparency to the Fed, to the SEC, to the Treasury, to anyone who
>> would have even bothered to look as to how much of a catastrophe was
>> being created, so that when anything fell, whether it was the subprime
>> mortgage or whether it was a credit complex security, it was all below
>> a pile of immense interlocked, incestuous borrowing, and that’s what
>> is bringing down the entire banking system.
>
> How odd that you didnt warn of that before it happened.
>
Actually the Acts (Glass & Steagall) were both reactions of the U.S.
government to cope with the collapse of a large portion of the
American commercial banking system in early 1933. While many economic
histories attribute the collapse to the economic problems which
followed the Stock Market Crash of 1929 it is clear that the U.S.
banking collapse of 1933, which came three and a half years later,
could only have been partially the result of the stock market collapse
in October 1929; But even though the Acts included banking reforms,
some of which were designed to control speculation, later some
provisions such as Regulation Q that allowed the Federal Reserve to
regulate interest rates in savings accounts were repealed by the
Depository Institutions Deregulation and Monetary Control Act of 1980
and also provisions that prohibit a bank holding company from owning
other financial companies were repealed on November 12, 1999 by the
Gramm-Leach-Bliley Act signed by President Bill Clinton. The warning
was not heeded or taken seriously as the complaints rang out when
these revisions were voted on.
http://en.wikipedia.org/wiki/Glass-Steagall_Act
http://en.wikipedia.org/wiki/Depository_Institutions_Deregulation_and_Monetary_C...
http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act
