News that Gets My Goat..
Does anybody remember the Great recession that crashed down on us in 2007? You know, the one where millions of Americans (and millions more around the world) lost their jobs, homes, savings, benefits; that one?
You remember don’t you? The Bush and Obama administrations, along with the Congress had to enact Keynesian emergency stimulus measures to keep financial institutions afloat so we didn’t go into an actual depression like Grandma used to tell us about. Yeah, the bailouts and stimulus that drove so many teabaggers crazy as if they’d prefer to live in a Mad Max movie than the society and economy that we’ve built together since the Great Depression and World War II.
As all this went down, I read up on the Great Depression and how the Federal government responded (or in the case of the Hoover administration, didn’t respond.) In a trial and error process that took some years, FDR and Jessie Jones spent $50 billion (about $700 billion in today’s money) salvaging the banking system, lending to communities and companies, and even directly putting people to work building projects like the Hoover Dam, parks, roads and public buildings through the National Recovery Administration, the Works Progress Administration, and the Civilian Conservation Corps.
At this time the congress created the Securities and Exchange Commission, the Federal Deposit Insurance Corporation, and passed the Glass-Steagall Act. These and other reforms worked to prevent unhealthy speculation, abuses, and the boom and bust cycles that plagued our country since its inception.
In the 1990’s Congress passed and Clinton signed the Commodities Futures Modernization Act and the repeal of the Glass-Steagall act, instituting a booming market in Collateralized Debt Obligations, Credit Default Swaps, Mortgage Backed Securities and Sub-Prime Mortgages; the instruments of an economic destruction that the world has yet to recover from.
So, where am I going with all this? Today I read an AP report that the SEC is considering whether to ease rules on private companies that issue shares. SEC Chair Mary Shapiro, a career financial insider (and friend of the Madoff family) informed Rep. Darrell Issa, R-Calif., Chairman of the House Oversight and government Reform Committee, that her staff is reviewing the rules in order to allow private companies to raise money by issuing stock while avoiding reporting requirements that public companies must follow. This from someone who as a SEC Commissioner in 1993 advocated “financial innovation” through removal of unnecessary and inappropriate regulatory supervision of securities firms and derivative markets. We should all remember how well that worked out.