House of Cards
Sep 23, 2010 | 1214 views | 0 0 comments | 16 16 recommendations | email to a friend | print
In his Oscar-nominated No End in Sight (2007), documentary filmmaker Charles Ferguson filled in the gaps left by mainstream news organizations with his measured, exactingly researched and blow-by-blow account of America’s misguided, poorly executed and at times venal war effort in Iraq. Ferguson provides the same deep investigative work in Inside Job, which uncovers the recklessness and greed that led to the 2008 financial collapse. One survey named Inside Job the highest-rated film at the 2010 Cannes Film Festival.

Traditional American finance 1930s (post-Great Depression) though 1979

• 1933-35: Motivated by financial abuses that contributed to the Great Depression, the Glass-Steagall Act and the Securities and Exchange Act limit financial risk-taking and require extensive disclosure of financial information

• Bankers/traders earned salaries in line with other professionals; tightly regulated financial sector

1980s: The Reagan Era laissez-faire and trickle-down economics

• 1980-82: Substantial deregulation, especially the Garn-St. Germain Act, which deregulates savings and loan companies, leading to the later S&L crisis

• 1980s: S&L scandal: loose regulations, lax enforcement lead to massive fraud; hundreds of S&Ls fail; $124 billion taxpayer-funded bailout

• 1980s: Neil Bush approves $100 million of bad loans to business partners through Silverado S&L, which subsequently fails

• 1987: Oliver Stone’s Wall Street immortalized financial sector greed and immorality

• 1989: Keating Five: Senators accused of improper influence in advocating against investigating Lincoln S&L, which collapses, and whose C.E.O. Charles Keating is convicted of fraud

• 1987-1990: Michael Milken, Ivan Boesky and other Wall Street executives convicted of fraud and insider trading

1990s: Clinton era

increasing connections between

Washington and Wall Street

• 1999: Passage of the Gramm-Leach-Bliley Act, AKA the “Citigroup Relief Act,” repealing Glass-Steagall and dissolving firewalls across financial sectors

• 1994: A new law gives the Federal Reserve regulation power; Alan Greenspan, head of the Fed, doesn’t use it

2000: Members of the Clinton Administration, particularly Summers and key Congress members including Senator Phil Gramm, enact the Commodity Futures Modernization Act, which bans all regulation of financial derivatives and exempts them from anti-gambling laws

• 2000: Dot-com bubble bursts

2000s: George Bush

pushes for further deregulation

and relaxed enforcement

• 2000s: new highly complex financial innovations flourish: securitization of mortgages, credit default swaps, synthetic Collateralized Debt Obligations (CDOs)

• 2000-2002: New York State Attorney General Eliot Spitzer sues eight investment banks for conflict of interest and recommending Dot-com stocks they thought were junk; settlements total $1.4 billion

• 2000-2005: Investigations of Fannie Mae and Freddie Mac reveal massive accounting fraud

• 2002: Arthur Andersen, auditor, convicted of obstruction of justice for shredding Enron documents; Arthur Andersen effectively disbanded

• 2003: WorldCom revealed to have inflated assets by $11 billion

2000-2007: Housing bubble: fed by the deregulated investment banking industry, mortgage lending quadruples, housing prices double

2005-2008: Goldman Sachs, Morgan Stanley, Deutsche Bank, and others use credit default swaps to bet against the same mortgage securities that they are selling as safe

2004: After intense lobbying by investment banks, the SEC lifts the leverage limits on the investment banking industry, allowing them to borrow more

2005: International Monetary Fund Chief Economist Raghuram Rajan warns of dangerous incentives and risks in the financial system; Summers dismisses him as a “Luddite”

2006: Hank Paulson, C.E.O. of Goldman Sachs, becomes U.S. treasury secretary

2007: Housing bubble shows signs of bursting; home ownership reaches all-time high, savings rates are at historic lows

2008: Current recession begins

• Collapse of Bear Stearns (March) and then Lehman Brothers (September)

• U.S. rescues and takes control of AIG with $85 billion of loans one day after Lehman declares bankruptcy

• Median housing prices drop almost a third over three-year period

• Record home foreclosures

•Unemployment rises from 5.8 to 9.3 percent in one year

• U.S. government pledges $700 billion emergency bailout for the financial industry, known as T.A.R.P.

2010s: The Obama era Continued connections between

finance industry and government

Former head of New York Federal Reserve Bank Tim Geithner becomes U.S. treasury secretary, Larry Summers becomes director of the National Economic Council, President Obama re-appoints Ben Bernanke as chairman of the Fed; Obama appoints Wall Street executives to senior regulatory and economic policy positions

•2010: Financial reform passes

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