Breaking: Financial Crisis NOT Caused by the Poor!

If you listen to the Right wing ramble on, you would think that the financial meltdown was caused by poor people who took out mortgage loans and black people who ran Freddie and Fannie. The Financial Crisis Inquiry Commission, chaired by former California Treasurer Phil Angelides, has issued its final report (although it is embargoed until tomorrow), and The New York Times has some details. It comes down to a lot, among them partisan division within the panel (with one Republican writing a dissent blaming government policy goal to increase home ownership), but what it really comes down to regulatory failings:
While the panel, the Financial Crisis Inquiry Commission, accuses several financial institutions of greed, ineptitude or both, some of its gravest conclusions concern government failings, with embarrassing implications for both parties.
And why would such regulatory failings happen in 30 years of deregulatory mindsets culminating will full speed in the last decade? Hmm. Let's follow the money. Only fair, since this is all about money, after all.
The report could reignite debate over the influence of Wall Street; it says regulators “lacked the political will” to scrutinize and hold accountable the institutions they were supposed to oversee. The financial industry spent $2.7 billion on lobbying from 1999 to 2008, while individuals and committees affiliated with it made more than $1 billion in campaign contributions.
But hey, at least the Supreme Court still thinks unlimited campaign spending by corporate giants is a great idea.

I digress though. Let's go back for a minute to what we have been constantly told about this crisis: that poor people brought the world to its knees, and they just snookered all these innocent banks into issuing them mortgage loans. And that's why the economy went into a tail spin. It's the poor people's fault! Or at least, the fault of any and all government policy or goal to help the poor. Stop helping the poor, you'll ruin the economy!

But the Commission just poured cold water all over it.
The report does knock down — at least partly — several early theories for the financial crisis. It says the low interest rates brought about by the Fed after the 2001 recession; Fannie Mae and Freddie Mac, the mortgage finance giants; and the “aggressive homeownership goals” set by the government as part of a “philosophy of opportunity” were not major culprits.
So who gets the blame? Well, just what do you think the bankers spent almost $4 billion in combined lobbying and campaign efforts doing? Apparently, buying lots of tranquilizers for those who would regulate them.
The decision in 2000 to shield the exotic financial instruments known as over-the-counter derivatives from regulation, made during the last year of President Bill Clinton’s term, is called “a key turning point in the march toward the financial crisis.”[...]

On the other hand, the report is harsh on regulators. It finds that the Securities and Exchange Commission failed to require big banks to hold more capital to cushion potential losses and halt risky practices, and that the Fed “neglected its mission.”

It says the Office of the Comptroller of the Currency, which regulates some banks, and the Office of Thrift Supervision, which oversees savings and loans, blocked states from curbing abuses because they were “caught up in turf wars.”

“The crisis was the result of human action and inaction, not of Mother Nature or computer models gone haywire,” the report states. “The captains of finance and the public stewards of our financial system ignored warnings and failed to question, understand and manage evolving risks within a system essential to the well-being of the American public. Theirs was a big miss, not a stumble.
I will note two points about this. First, who's surprised that the philosophy of deregulation and the corrupting influence of lobbyist and campaign cash caused the worst financial calamity in the world's recent memory? What the commission found - the lack of regulatory enforcement - wasn't an accident, or even the result of oversight. It was the direct result of carefully formulated political ideology: one that consciously and mindfully robs the marketplace of safeguards to protect consumers and smaller investors, which results in an uneven playing field tilted to the insiders and the super wealthy. It is the result of consciously and carefully placing foxes to guard the henhouse. The guardians of our financial security so despised accountability institutional responsibility that our then-Treasury Secretary showed up to Congress demanding $700 billion taxpayer funds for him to spend however he pleased, all laid out in a three-page proposal.

The second point is this: read the above quoted portion again. See some things that look familiar? It should, because those exact flaws were addressed in the landmark Wall Street reform legislation (the Dodd-Frank bill) that the President signed into law last year. It raised capital requirements for banks, regulated over-the-counter derivatives, and removes consumer protection functions from a myriad of agencies none of which see consumer protection as their primary function and gives it to an independent bureau. Maybe that should make it clear to everyone both why the Congressional Republicans want to defund that law and why we cannot allow that to happen. Without those specific protections and common sense rules, it will happen again.

As these retrospective examinations get released, we come to understand better and better the implications of the disastrous economic policies of the past decade, and the smarts, hard work, and the absolute necessity of the last two years of progress made under President Obama in advancing common sense rules of the road for industry, protection for consumers and the public, and in stabilizing the entire world economic structure. Right now, the Republican House is trying to turn it all back. We cannot let them.