- AIG CEO Edward Liddy interacts with protestors from the group â€œCode Pinkâ€ as he arrives to testify before the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises on Capitol Hill in Washington, dc, on March 18, 2009.
“Our frontiers of today are economic, not geographic. Our enemies of today
are the forces of privilege and greed within our own borders.”
—Franklin D. Roosevelt, January 8, 1936
"Sold Out: How Wall Street and Washington Betrayed America,” a report issued by the Institute for Public Accuracy, begins with A Call to Arms that asks, “What caused this catastrophe?”—that is, the current economic disaster engulfing the US and international communities. The report gives a detailed accounting of whom, how, and why the very regulations that were created to stave off a crisis like this were slowly and purposely legislated away. It reveals a symbiotic relationships between fat cat lobbyists with enormous amounts of money to invest in elected officials and legislators who were more than willing to both ignore and jettison these protections. An ever-tightening ring of fire, “Sold Out” scalds readers’ sensibilities as it explains how the latest brotherly band of “forces of privilege” ripped off citizens and created today’s no-end-in-sight financial meltdown. It ends with 10 prescriptive actions that incensed Americans can and should take, because despite the exposure of these feckless inbreeders of greed, many continue to act with impunity, defend their actions, and/or attempt to sell Americans more lies amid woeful stories that it is not they, but nameless others, who are responsible for what economist Nouriel Roubini calls the, “Made-off Ponzi economy.” Dubbed “Dr. Doom” due to his dire (yet accurate) forecasts, Roubini predicts no economic relief will occur until 2010, if even then. Yet each and every Wall Street rally—at least six in the last year—is touted as proof that the crisis has bottomed out and recovery has arrived. Roubini calls these rallies “dead cat bounces”—a trader’s term that implies even dead cats bounce when dropped from great heights. Perhaps these are not lies, but protective musings put forth by the same folks who said that disclosure and transparency in speculative and predatory investing practices would “confuse investors.” Or perhaps the false positive of this talk of recovery is meant to sidetrack Americans from harsher realities—that the very people who created this crisis are lucratively being rewarded with gobs of taxpayer money. Richard Blumenthal, attorney general of Connecticut—home of insurance giant American International Group (AIG), the recipient of a $185.5 billion bailout despite fleecing investor’s savings—announced that subpoenaed records show AIG actually paid out $218 million—$53 million more than the reported $165 million—in bonuses with 73 executives receiving at least $1 million and 5 getting over $4 million. As more secret details are revealed, private security companies are being hired to protect executives’ homes and offices from demonstrators looking to vent their ire. The Connecticut Working Family’s party is planning a bus tour of these financiers’ homes to “give folks…who are struggling and losing their homes, jobs and health insurance an opportunity to see what kinds of lifestyle billions of dollars in credit-default swaps can buy.” Educational and informative, “Sold Out” will certainly not confuse. Senior editor, Lorna Tychostup interviewed its lead author, Robert Weissman by phone from his office in Washington, DC in late March.
The report begins by cataloging how the financial sector drowned political candidates in more than $1.7 billion in campaign contributions and another $3.3 billion on lobbyists, hired to press for deregulation. That’s a total of $5.2 billion spent on both Democrats and Republicans, and deregulation schemes that began with the Reagan administration. What did that money buy?
The crucial removals of regulatory restraints on Wall Street, commercial banks, and insurance companies that led them to build up the house of cards that has collapsed and destroyed, not only many of these leading firms and the financial sector, but the overall national economy and also the global economy is traceable in large part to policy decisions that were purchased in large part by that $5 billion.
Explain the Glass-Steagall Act of 1933 and the difference between commercial and investment banks.
The Glass-Steagall Act was adopted as a response to the financial misdeeds that contributed to the collapse of the stock market in 1929 and the Great Depression. It imposed a separation between commercial banks that offer savings and checking accounts and mortgages, and investment banks and Wall Street security firms that engage in a diverse array of speculative investment activities. Glass-Steagall was adopted to prevent the abuse by commercial banks that put depositors’ money at risk by putting it into risky investments that they had undisclosed interests in. The act was meant to keep investors’ money safe, prevent it from being used for speculative purposes, and to protect the commercial banking system, which is so important to the overall economy. It prohibited commercial banks from offering investment banking and insurance services, thus creating a “firewall” between commercial banks and high-risk activities of speculative securities firms.