“. . . . and the CHICKENS . . . . Come Home To Roost”
But The Same Old Foxes Have Charge Of The Hen House
By Carolyn Cormey
It’s time to talk “Turkey” because for certain, what we have been hearing (or not) out of Washington DC has been closer to “Bull.”
The FannieMae and FreddieMac issue finally toppled the house of cards built by our Senators and Congressmen in this administration and the last. The foundation for our current financial crisis began under President Clinton who signed the 1999 Gramm-Leach-Biley Bill that finally dismantled the remaining pieces of the Glass-Steagall Act which segregated the financial industry by government regulatory walls. (After the 1929 stock market crash which led the country into the Great Depression, Congress passed the Glass-Steagall in 1933 to stop commercial banks from continuing to take too many risks with depositors money).
In tearing down the regulatory walls that segregated the financial industry, now commercial banks could merge with investment banks or insurance companies or they all could merge together to form conglomerates - combining commercial banking, investment, lending and insurance underwriting. By special waiver, some conglomerate mergers were allowed as early as 1994 but in passing the Gramm-Leach-Biley in 1999, the Congress made these mergers permanent and opened the door for more of them. Congress deregulated the Financial Sector and Oversight responsibility for these mega-financial-conglomerates became the duty of the Senate Banking Committee and the House Financial Services Committee.
The “Financial Sector” is composed of these segments: Commercial Banks, Savings & Loans, Credit Unions, Finance/Credit Companies, Securities and Investments, Venture Capital, Hedge Funds, Private Equity & Investments, Insurance, Real Estate, Mortgage Banking and Accountants. Each year, each of these segments provide a list of all donations made to Senators or Congressmen. Here is the “appearance” of conflicting interests. Some (but not all) Democrat and Republican Members of both the Senate Banking Committee AND the House Financial Services Committee, accept large campaign donations from one or more (or even all) of the different segments within the Financial Sector, at the same time they are supposed to be providing oversight on the activities of the Financial Sector!
Consider the following contribution figures from PACs and individuals giving $200 or more, during the 2007-2008 election cycle, released September 2, 2008 as quoted by the Center for Responsive Politics: The following figures come from just the “Top 20” Senators or Congressmen receiving the largest donations from each segment.
The Senate Committee on Banking, Housing & Urban Affairs: Chris Dodd (Democrat Senator since 1981) has “Chaired” this influential Committee since January, 2007. On his Committee, there are 11 Democrats and 10 Republicans, along with 5 subcommittees to help and provide information.
Senator Dodd “appears” to have the most conflicting interests of any member. In just 2007/2008 (as reported on 9/2/2008) he has received approximately $6,983,464 in campaign donations from the Financial Sector while, at the same time Chairing the Committee charged with providing oversight. (Financial Sector contributions to Senator Dodd 1989 – 2008 total $13,204,556. Richard Shelby, a Republican Senator since 1987, was the previous Chair of the Banking Committee from 2003-2007. Financial Sector Contributions to him between 1989 – 2008 total $4,360,242
Of the other 18 members of Senator Dodd’s Senate Banking Committee, 7 Members (Democrats & Republicans) made the “Top 20 Senators” list of donation recipients on one, more or all of these lists of different segments that compose the Financial Sector over which they provide oversight. This does not include Financial Sector donations made to Sub-Committee Chairs and members.
The House Financial Services Committee: Congressman Barney Frank was elected as a US Congressman in 1981 and immediately assigned to this Committee. In 2004, he became the “Ranking Member” and in January, 2007 he became the “Chair” of this powerful, influential Committee. On his Committee there are 37 Democrats and 33 Republicans, along with 5 subcommittees to help and provide information.
In just adding together the donation amounts where Congressman Frank appears on the “Top 20 House Member” recipient list each segment of the Financial Sector provides - in just 2007/2008 received a minimum of $802,000. Donations made to him from the segments where he did not appear on their “Top 20” list, are not included in this number and would increase it. He received these donations from the Financial Sector while, at the same time Chairing the Committee charged with providing oversight. (Financial Sector contributions to Congressman Frank 1989 – 2008 total $2,494,361. Mike Oxley, Republican Congressman from 1981-2007, was the previous Chair of the Banking Committee from 2005 – 2007. Since he is no longer in office, I was unable to obtain total Financial Sector Contributions made to him)
Of the other 70 members of Congressman Frank’s Committee, 35 Members (Democrats & Republicans) made the “Top 20 Senators” list of donation recipients on one, more or of the donation lists of the different segments that compose the Financial Sector over which they provide oversight. This does not include Financial Sector donations made to Sub-Committee Chairs and members.
The media keeps reporting just FannieMae and FreddieMac donations but completely misses or chooses not to report the millions of dollars donated to Senators and Congressmen sitting on the two powerful, influential Committees that provide oversight on their activities!? Perhaps the more serious “crime” is that these Senators and Congressman knowingly and willingly accept these donations from the Financial Sector, while sitting on these Committees. The “donations” have been spent or are sitting in their Campaign accounts but it is now painfully obvious that little or no “oversight” was provided on the behalf of the American public, for the protection of the American people.
The Savings & Loan $160 Billion Bailout. We have walked this road before but no lessons were learned. Among the major events leading to the Savings & Loan $160 Billion bailout taking us into the recession of 1990-1991, Congress banned interest rate ceilings on mortgages in 1980 and removed the federal ban on adjustable-rate mortgages in 1981. The Savings & Loans were deregulated and then, LITTLE OR NO OVERSIGHT WAS PROVIDED. In a feeding frenzy - the S&Ls stuffed themselves with crazy Adjustable Rate Mortgages with no interest rate caps! When people could not pay their mortgages – there were massive foreclosures and between 1986 and 1991, the per year number of new homes constructed, dropped from 1.8 million to 1 million, the lowest rate since World War II.
There are no published disclosure records for the Financial Sector (Savings & Loan segment) on donations made to and received by Senate Banking Committee Members and House Financial Services Committee Members prior to and during the events leading to the Savings and Loan Bailout so it may not be entirely fair to draw comparisons between these two events BUT there are some comparisons that are completely valid and are repeated over and over again.
CONGRESS DEREGULATES IN RESPONSE TO STRANGLING REGULATIONS, THEN FAILS TO PROVIDE OVERSIGHT, THEN REACTS IN PANIC BY INACTING REGULATIONS THAT STRANGLE, THEN EVENTUALLY DEREGULATES, THEN FAILS TO PROVIDE OVERSIGHT . . . . and the American Public picks up the bill, over and over again!
The “Clinton Play Book” sets the new rules on crisis management in DC land. “It did not happen . . . I wasn’t there . . . I’m shocked . . . I’m a victim of a right (or left) wing conspiracy.” Senator Dodd and Congressman Frank have it perfectly mastered. When this financial crisis broke, each of them immediately rushed to every TV Camera and got booked on every Sunday show they could find, re-writing history, and reinventing themselves as “victims” of FannieMae, FreddieMac and those greedy Wall Street Corporations who pulled the wool over their eyes and the American people. Dripping in sincerity, they assured us that their main concern was saving “Main Street” and they would get to the bottom of this, find the culprits’ . . . and then put themselves, along with their committees and sub-committees in charge of investigating all of this. . . . . And the “Foxes are still guarding the hen house?”
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