Rachel Maddow Show: Deregulation For Dummies

[media id=7636] Part 1 [media id=7637] Part 2 You Tube (entire segment) Rachel Maddow reminds all of us just what got us to where we are in the fir

Part 1

Part 2

You Tube (entire segment)

Rachel Maddow reminds all of us just what got us to where we are in the first place with this financial crisis. Deregulation.

For anyone who would care enough to know (and be completely disgusted with) just how big of a mess we're actually in, go read Matt Taibbi's latest article for Rolling Stone: "The Big Takeover: The global economic crisis isn't about money - it's about power. How Wall Street insiders are using the bailout to stage a revolution".

Maddow: There would be no outrage about AIG's bonuses if AIG hadn't needed bailing out, right? I mean sure people get mad at fat cats with high salaries when everyone else is broke. But it's the fact that this company was using our money, taxpayers money to pay those bonuses that caused the entire country to grind our teeth down their nub ends to rage at these guys.

So there would be no outrage about AIG turning taxpayer bailout dollars into executive bonuses if there hadn't been a bailout. AIG wouldn't have needed bailing out if it weren't too big to fail, too integral to all these other parts of the financial industries. AIG wouldn't have become too big to fail if they hadn't become a big hybrid complicated uber-financial everything company that made all sorts of arcane financially engineered moves that got them squirreled into every kind of financial related business that you can think of.

AIG wouldn't have become a big hybrid complicated uber-financial everything company if there hadn't been, and this is key, deregulation of Wall Street that allowed firms to get like that. And massive deregulation of Wall Street wouldn't have happened without the rise of a political movement that preached that regulation was inherntly evil and deregulation was inherently wise and virtuous and would make everyone rich and it would be free well behaved puppies for every family.

Do you want an example of how this deregulation thing worked? You can totally use this at the high school dance or a bar or whatever to try to impress someone. Somebody starts complaining about the bailout. Complaining about AIG. You tell them actually the real villain here is Gramm-Leach-Bliley. Just say it with total confidence. Watch. You will get dates.

Here's how to explain it. The Gramm-Leach-Bliley Act of 1999 was introduced by three Republicans, Gramm, Leach and Bliley. It repealed the wall that had been put up in the Great Depression. A wall that kept investment banks separate from commercial banks, separate from insurance firms and so on. When that wall got torn down we ended up with big hybrid complicated uber-financial everything companies that we couldn't have had before. That's how Citibank ended up eating Travelers Group Insurance to change from Citibank into Citigroup which just happened to be completely impossible to regulate. All of the sudden these new uber-giant complicated hybrid firms the Wall Street cops, the regulators, they were essentially still on horse back while the robbers, the guys trying to get away with anything to make a buck, they were in space ships. So we had robbers in space ships and cops on horse back.

Alright so if talking about Gramm-Leach-Bliley doesn't get you a date or at least admiring glances from your peers, drop one of these on them. The Commodity Futures Modernization Act of 2000. That one said that certain things that financial companies do to spread their risk around, to keep their balance sheets looking good even when they're making hugely risky deals. These are things like credit default swaps and collateralized debt obligations. You've heard these terms right?

This legislation decided that those things, those risk hiding things would be completely exempt from regulation. Completely exempt. They would not be regulated. So from a cops and robbers perspective that's like saying okay now it's legal to wear a ski mask and carry a gun inside a bank. Oh and driving a get-away car is legal now too. How'd you like to be a cop in that town? Deregulation laws like Gramm-Leach-Bliley and The Commodities Futures Modernization Act, these were pushed as great ideas to get the horrible burden of government regulation off of Wall Street. The horrible burden of regulation was lifted off of Wall Street and then Wall Street proceeded to self destruct. Now it's time to start over. And maybe this time avoid the same mistakes.

She goes on to talk to David Cay Johnston, author of Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense and Stick You With the Bill. The one thing this segment was missing was any discussion of Enron and the damage done to the economy when yet another wonderful Republican idea came to fruition. Deregulate those utility industries and everything will be just grand. Well we see how that worked out.

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