This is from DKos poster Devilstower...Kos thinks its the best post ever on his site, s that should tell you something...
I've read this thing 20 times, I printed it out, underlined stuff, read the entire thing to all the people in the physical therapy place today, and in general, have tried to memorize it as much as possible, it spells it out VERY well...
The link:
http://www.dailykos.com/storyonly/2008/9/21/9322/74248/245/602838**PLEASE READ THE WHOLE THING, it is long, but incredibly good**
Some important snips:
In 1982, the same year John McCain entered the Senate, a bill was put forward that would
substantially deregulate the Savings and Loan industry. <SNIP>
Seven years later, the S&L industry was collapsing. What was the cause? Garn-St. Germain handed the S&Ls a greatly expanded range of capabilities, allowing them to go head to head with full service banks, but it
didn't give them the bank's regulations.<SNIP>
In 1985, three years after the deregulation of the S&Ls, the chairman of the Federal Home Loan Bank Board saw that the situation was already looking shaky, with the potential to become much worse. He instituted a rule to limit the amounts and types of investments S&Ls could carry on their books in an effort to head off disaster. However,
many savings and loans -- among them Lincoln Savings & Loan Association of Irvine, CA, which was headed by a fellow named Charles Keating -- promptly ignored these rules.<SNIP>
A quintet of senators,
among them John McCain, began having meetings with both the management at Lincoln and the regulators at the loan board. ]
Alan Greenspan also helped out with a letter to the regulators, asking that Lincoln be exempt from the new rules.<SNIP>
Keating and other members of Lincoln's parent company
padded McCain's pockets with $112,000 in campaign contributions.<SNIP>
Following the S&L crisis, the Resolution Trust Company was formed to swallow up the debt of Lincoln and 746 other S&Ls gone wild, and
taxpayers were left with the $125 billion bill. The resulting budget deficit forced cutbacks in other programs.
<SNIP>
by 1999 Phil Gramm -- who had entered the Senate two years after McCain and quickly become the economic guru of the Keating Five maverick -- put forward the Gramm-Leach-Bliley Act. This Act passed out of the Senate on a party line vote with 100% Republican support, including that of John McCain.
<SNIP>
This act repealed part of the Glass-Steagall Act...(which was) put in place in 1933 to control the rampant speculation that had helped cause the collapse of banking at the outset of the depression, and to prevent such consolidation of the banks that the nation had all its eggs in one fiscal basket.
<SNIP>
Gramm-Leach-Bliley reversed those rules, allowing not only more bank mergers, but for banks to become directly involved in the stock market, bonds, and insurance. Remember the bit about how S&Ls failed because they didn't have the regulations that protected banks? After Gramm-Leach-Bliley, banks didn't have that protection either.
<SNIP>
The next year...he was back with the Commodity Futures Modernization Act, which ...greatly expanded the scope of futures trading, created new vehicles for speculation, and sheltered several investments from regulation.
<SNIP>
large parts of this bill were written by industry lobbyists. This famously included the "Enron Loophole" that exempted energy trading from regulation and was written by (big suprise) Enron Lobbyists working with Gramm.
<SNIP>
The first Act promoted bank buyouts and mergers that reached such an insane pitch that the average consumer could only keep up by tracking the changing names on their checks and credit cards.
<SNIP>
Gramm-Leach-Bliley helped ensure that we would have financial entities that were "too big to fail." Rather than choosing to enforce rules that kept these institutions apart, the deregulators chose to create monster bankeragasurances whose downfall (and existence) was enough to threaten the whole system.
<SNIP>
But if Gramm-Leach-Bliley removed the limits on size and scope, these new institutions still needed fuel.
<SNIP>
For that, the Commodity Futures Modernization Act was a godsend.
**IMPORTANT**
Among those instruments which the CFMA sheltered from regulatory scrutiny was something called the "credit default swap." A kind of insurance one bank could exchange with another, credit default swaps supposedly made it safe for banks to take on ever riskier forms of debt. The Act didn't invent these swaps, though they were relatively new. Instead, by placing them in a state where they were not only unregulated but almost perfectly opaque, credit default swaps were turned into the perfect vehicle to fuel a Wall Street revolution. No one had any idea what these things were actually worth, they were traded "over the counter" without being administered by any exchange, and even the SEC could monitor their existence only indirectly.
<SNIP>
Greenspan loved credit default swaps. He (thought) such instruments would be the salvation of the industry by spreading around risks. To (him), both their complexity and their lack of transparency were good things, since swaps would only be handled by the big boys who knew how to play with fire.
<SNIP>
From the beginning, there were plenty of people in the financial community whose opinion of these unregulated credit swaps was not as rosy as that of Gramm, Greenspan, and McCain. Chief among those speaking in opposition was SEC Chairman, Arthur Levitt.
<SNIP>
Credit default swaps did allow the banks to share risks. So much so, that banks raced each other in an effort to find more risks. They made it possible for the down payment on homes to become 3%, 1%, 0%. Skip the credit check, avoid the employment requirements, damn the torpedoes, full speed ahead! We've got a credit default swap, we can do anything!
<SNIP>
As the banks piled up crappy mortgages, they heaped on ever more of the credit default swaps -- and they still had no idea how to value the things. Worse, they began to trade the swaps themselves as if they were an investment, treating them like something worth holding instead of a big bundle of cartoon bombs whose fuses were already lit. Since very few loans were falling into default at the time, owning a default swap seemed like a way to collect fees without ever paying out. Banks wanted more, and more, and more.
<SNIP>
The unregulated and poorly reported credit default swaps may have actually passed $70 trillion last year, or about $5 trillion more than the GDP of the entire world.
<SNIP>
so long as no one actually had to pay off on the swaps, the party went on. Even usually conservative (in the fiscal sense) companies like AIG started to worry that they were being left behind and leapt headlong into the swap pool.
<SNIP>
Credit slowed, home prices fell, and the whole snake started to eat itself tail first. Suddenly, credit default swaps were not sources of limitless cash. It turns out that an insurance policy -- even a secret, unregulated policy -- is occasionally expected to pay. Speculators started to look at the paper they were holding and for the first time realized it could all be worthless. Worse, it could (and did) represent a massive debt; one that no one had the funds to cover.
<SNIP>
The sub-prime mortgage crisis that has not only come so close to utterly destroying the markets, but has ruined the value of many people's homes and left millions with mortgages they can't pay, was also the outcome of the deregulation created by these men. The very predictable outcome. When taxpayers are left holding the bag for $1 trillion this time around, it's hard to believe it's any sort of accident.
<SNIP>
It's bad enough if John McCain didn't know that. It's far worse if he did.