Just $5 Billion to Destroy the World Economy

There's plenty of outrage to go around these days: outrage about the taxpayer money going to bailout Wall Street bankers, outrage about how the excesses of a gigantic credit bubble could have gone unchecked, outrage about how government regulators could fail to catch Bernard Madoff and his ilk, etc. Given this surfeit of outrage, it's surprising that more of it isn't directed at the media's utter failure to point to these things in any signficant way.
Last week, a group called Wall Street Watch (a joint effort by the non-profits Consumer Education Foundation and Essential Information) released a scathing report called "Sold Out" that details how enormous political contributions paved the way to removing regulations on the finanicial industry. According to the report, in the 10 years from 1998 to 2008:

Commercial banks spent more than $154 million on campaign contributions, while investing $363 million in officially registered lobbying;

Accounting firms spent $68 million on campaign contributions and $115 million on lobbying;

Insurance companies donated more than $218 million and spent more than $1.1 billion on lobbying;

Securities firms invested more than $504 million in campaign contributions, and an additional $576 million in lobbying. Included in this total: private equity firms contributed $56 million to federal candidates and spent $33 million on lobbying; and hedge funds spent $32 million on campaign contributions (about half in the 2008 election cycle).

In total, about $5 billion of bribe money was spent by the industry to achieve their short sighted objectives. This money brought about the repeal of the Glass-Steagall Act, placed former financial industry personnel in key government regulatory positions, and funded a small army of 3000 lobbyists. We now know that these things, particularly the clearing of regulations and restrictions, are at the heart of the excessive credit bubble that has since destroyed an estimated $50 trillion of wealth worldwide.

The fact that it takes an independent group like Wall Street Watch to bring these facts to light is outrageous. At a minimum, why aren't we now seeing this reported by CNBC, 60 Minutes, The Wall Street Journal, etc.? More importantly, why wasn't this reported in the years leading up to this mess?

Until we get a gigantic bubble of citizen outrage, don't expect anything to change. In the mean time, be thankful for efforts like Wall Street Watch.

From "Sold Out": 12 Key Policy Decisions Led to Cataclysm
In 1999, Congress repealed the Glass-Steagall Act, which had prohibited the merger of commercial banking and investment banking.
Regulatory rules permitted off-balance sheet accounting -- tricks that enabled banks to hide their liabilities.
The Clinton administration blocked the Commodity Futures Trading Commission from regulating financial derivatives -- which became the basis for massive speculation.
Congress in 2000 prohibited regulation of financial derivatives when it passed the Commodity Futures Modernization Act.
The Securities and Exchange Commission in 2004 adopted a voluntary regulation scheme for investment banks that enabled them to incur much higher levels of debt.
Rules adopted by global regulators at the behest of the financial industry would enable commercial banks to determine their own capital reserve requirements, based on their internal "risk-assessment models."
Federal regulators refused to block widespread predatory lending practices earlier in this decade, failing to either issue appropriate regulations or even enforce existing ones.
Federal bank regulators claimed the power to supersede state consumer protection laws that could have diminished predatory lending and other abusive practices.
Federal rules prevent victims of abusive loans from suing firms that bought their loans from the banks that issued the original loan.
Fannie Mae and Freddie Mac expanded beyond their traditional scope of business and entered the subprime market, ultimately costing taxpayers hundreds of billions of dollars.
The abandonment of antitrust and related regulatory principles enabled the creation of too-big-to-fail megabanks, which engaged in much riskier practices than smaller banks.
Beset by conflicts of interest, private credit rating companies incorrectly assessed the quality of mortgage-backed securities; a 2006 law handcuffed the SEC from properly regulating the firms. Sphere: Related Content