CLOSE THE FLOODGATE TO FRAUD: RESTORE REGULATION

Written by Jim McGrath Tuesday, 29 December 2009 19:15

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Some writers are decrying the introduction of legislation by Sens. McCain and Cantwell as a sequel to Glass-Steagall, arguing it was of limited effect.

(On the contrary, I don't see what is so difficult or inappropriate in making banks unable to fraudulently approve loans for securities they underwrite.

The writer to the referenced article said the effects of Glass-Steagall were debatable. Where did she ever draw that conclusion? No economic genius is she, obviously. Did she conclude that from the overall experience of 1933 to 1999 when we had no depression, only recessions, comparing it to the experience of 2000 to the present when it was bubble city and its aftermath, yet to be played out? What history book does she read? Phil Gramm's, which prooftexts everything so it comes out with the same conclusion: if it goes up, we need more free rein market and if it goes down we do, too.

It's basic conflict of interest. Banks are tempted to use their approval of loans to do investment banking, in order to make a quick, solid short-term profit and then not give a damn about what happens down the road long-term.

Think about it: it's also basic morality. ALL behavior is "regulated"; all behavior is governed by laws made for the common good to help protect the citizenry from murder, adulterating the food supply, making cars and other machinery safe and yes, from fraud and dishonesty -- of which these formerly regulated financial transactions are really a type. Admit it.

It's simply outlawing the temptation to fraud, or the gates that open the flood to massive fraud as occurred in the past 10 years. For example, making it illegal for credit agencies like Moody's to favorably rate securities as AAA when they are junk quality. The commercial banks are in essence doing this, only going a step further by then giving them the money to invest in trash, knowingly. WHAT IS WRONG WITH OUTLAWING FRAUD OR A MAIN IMPETUS TO IT? WALL STREET, YOU HAVE LOST ALL SENSE, AND NOW YOU SEE WHY YOU ARE EXPERIENCING THE PROBLEMS YOU ARE NOW AND HAVE YET TOO, ON A SECOND LEG DOWN OR BEYOND.

In another part of the article, we read the lament "it's 1933 again". -- But you must ask why. Because it was the roaring 20s and 1929 again! Will you never learn?

For the summary and link to the article itself, see the Business Insider, at

http://www.businessinsider.com/here-comes-glass-steagall-the-sequel-2009-12