I usually don’t write about the political aspects of business because some people are bored to tears and others get so caught up in the whole “your party is evil” thing that it’s hard to have a civil conversation.
But I found myself alternating between stunned and steamed last week as Congress talked about the new Consumer Financial Protection Bureau being formed by the Obama administration.
Republicans basically said it had too much power and that there wasn’t enough congressional oversight to keep it from going off the deep end.
It didn’t help my mood that I decided last week to watch the DVD of “Inside Job,” a documentary film narrated by Matt Damon that looks at the economic crisis of 2008 that isn’t over yet.
It’s a good movie and it does a great job of explaining the trouble we’re in and how we got there. I wish that the members of Congress would see it. Of course, some of them are it, so maybe they already have.
The basic thesis is that our government deliberately deregulated the financial industry through both Democratic and Republican administrations to the point where it got out of control and:
•Created giant international banks with monopolies and massive lobbying power.
Formed an environment that promoted a lot of criminal activity (think Enron).
Developed mortgage securities and other financial instruments so complicated that most people couldn’t understand them.
Lobbied government heavily to ensure that securities formed by packaging risky mortgages together remained unregulated by government.
Convinced rating companies to say those securities were safe or risk losing out on the money to be made in rating them.
Sold those risky securities around the world as safe investments while at the same time buying a form of insurance that would pay them off when they went bad.
Of course we all know the end of this story.
To avoid complete financial collapse, the government came up with $700 billion to save the banks deemed too big to fail.
Some of those banks are still paying the money back, by the way, although most of them are doing pretty well already. On Friday, JPMorgan Chase, Wells Fargo and U.S. Bancorp all announced that they’d be raising their stock dividends.
In addition to helping big banks, the government also promised to beef up regulation so the same thing doesn’t happen again.
I am underwhelmed by what the Obama administration has done so far. It’s new financial regulations seem pretty weak to me. It also has done little to punish the wrong-doers in our financial debacle.
The Federal Deposit Insurance Corp. has recently filed suit against three former Washington Mutual executives — including former CEO Kerry Kilinger — in civil court for $900 million on Thursday of last week. It’s accusing them of pushing the bank to the brink by pumping out risky mortgage loans used to create those complicated securities when they knew it was wrong.
As you probably remember, WaMu collapsed in September 2008 and was sold to Chase for $1.9 billion.
This column is taking a long time to get to the point, so here it is:
The financial world as we know it came so close to collapse that we should still be waking up at night in a cold sweat.
Some people certainly still are as they try to rebuild their retirement funds or maybe just pay their bills.
The government has done precious little about this. And it’s an outrage for our political leaders to be talking puppets for the big banks when we’re all still suffering from the last dire mess they got us into.
Where was the congressional oversight when the big banks were selling AAA-rated securities backed by mortgages in which the home buyers had put down less than 1 percent of their own money?
I don’t know about you, but I think I could use a powerful agency on my side against the financial industry for a change. If there’s an industry with too much power these days, it’s big finance, and it’s time for our political leaders to take our side in this fight.
At the very least, it seems like it’s our turn.
Mike Benbow: 425-339-3459; benbow@heraldnet.com.
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