From UrbanSurvial.com :

The Next ‘Battle for Washington’

We begin this week with a note from a very savvy private investor that’s worth sharing:

For several decades, the financial players have had a wonderful time playing the game of Three Card Monte. Instead of having just three cards on a sidewalk stand or three walnuts and pea, they’ve had a half dozen regulators and literally a hundred countries to hide in.

Why else would the AIG Financial Products operation be set up in London, allegedly supervised by the US Office of Thrift Supervision, and write private insurance contracts called Credit Default Swaps on US mortgage bonds issued by unregulated non-bank finance companies owned by Wall Street brokerages? Lots of walnuts, just one pea (the risk), and literally dozens of street corners where the pea could be hiding, that’s why.

The new Agency proposed by Barney Frank would put a stop to the game of choosing the weakest regulator, and then hiding in some corner of the world that prizes financial secrecy. It would regulate activities, not institutions, and that would spoil the fun.

Imagine if we had regulated mortgage lending from a single authority, no matter who makes the loan? Perhaps the trigger to the meltdown, the subprime mortgage “business” and its evil derivative spawn (CDO and CDS) would not have turned into a threat to the entire world economy. After all, roughly 90% of the subprime mortgage bonds were issued by virtually unregulated entities controlled by Wall Street and a handful of “non-bank” finance companies like Ameriquest, New Century and Countrywide.

It’s time to put aside the foolishness that blames banks for the subprime meltdown, since the entire banking industry had only about 10% of the business. While we’re at it, forget blaming Fannie Mae and Freddie Mac, since they never guaranteed any subprime loans, and actually lost market share to the “private label” business in the crucial bubble years from 2003 - 2007. Finally, let’s put a stake through the evil political heart that tries to blame the Community Reinvestment Act. Unlike subprime (or even prime) loans, those CRA loans performed BETTER than expected, because the banks that made those loans held onto them and kept the risk for the full thirty years of the loans. CRA mortgages are the kind of loans that so many conservative pundits think our entire banking system should make — you know, where a local bank loan officer knows the borrower and the neighborhood, and makes a loan based on character, collateral and capacity to pay, and then takes 100% of the risk if the borrower can’t or doesn’t pay. It should be no surprise that CRA loans performed far better than subprime loans, and better even than some of the so-called “prime” loans that banks originated but then sold about thirty seconds later.

I don’t care if you call yourself a bank, an insurance company, a mortgage bank, a Wall Street broker-dealer, or a marching band — if you made residential mortgage loans, those loans will be subject to the mortgage regulations and examination by the mortgage regulator. If some hedge fund wants to claim they are really in Anguilla and not Connecticut, then they should be able to make all the mortgage loans they want to Anguillans, secured by Anguillan property. If they want to lend to people in the US secured by houses in the US, they should be subject to US mortgage rules, period.

If you write insurance policies in any of their forms, then the insurance regulators can look over your books. Calling the insurance contract a derivative CDS under the Commodities and Futures Modernization Act just doesn’t cut it.

If you sell stocks and bonds to individuals, then the new consumer protection replacement for the SEC looks at your stock and bond operation. I imagine a few of Stanford’s “Antiguan CD” buyers wish our SEC had made sure those bonds he was selling were legit. But the SEC is hopelessly compromised, given the professional career path every SEC employee hopes to follow. There is absolutely no personal professional future in protecting consumers from unbridled greed at financial institutions “regulated” by the SEC.

So now it’s easy to understand why a multi-million dollar propaganda campaign is cranking up to keep the regulators balkanized, to preserve those cracks in the system that allowed short term profits to be created by virtually unregulated subsidiaries, offshore trusts, special purpose vehicles and private over-the-counter transactions. Credit is the lifeblood of capitalism, and the Vampire Class needs its pools of darkness to keep feeding on the sheeple.

Don’t be surprised to hear your own elected representatives spouting slogans like “keep consumer choice” or repeating unsupported conclusions about how it will make credit more expensive for all of us. As if anything could be more expensive than several percentage points sucked out of our entire economy accounted as phantom bankster “profits”, paying very real bankster bonuses like an unregulated, uncapped tax on breathing.

Bear in mind that political contributions are the trump cards of politics, and your vote means squat to a Congressman faced with the chance to buy enough TV time to  buy thousands of your neighbor’s votes, especially if all he has to do is resist the formation of a Consumer Financial Protection Agency. Besides, it’s proposed by a Congressman that millions love to hate, and it sounds like more Big Government. What could be easier? The banksters are gathering in Washington, and they brought their checkbooks to buy the best government they can afford.

OK, let’s take a spin through media and see how the spinning is going in efforts to keep regulation and meaningful reform from happening.  A few headlines from this morning:

• “Elitist Protection Consumers Don’t Need” says a column in the Washington Post.  Say, isn’t this the same Washington Post that was headlined in the UK as the “Washington Post sorry for ethical lapse’? 

• In fairness to the WaPo, they did report last week that “Industry takes aim at plan to create financial protection agency”.  Facts versus opinions…OK, I’m down with that.

• The Corpus Christi Caller-Times headlines that “Debate heats up on financial regulatory reform.”

 

And my fave of the week so far on this?  “Banks may lose $1b in penalty fees owing to new law” headlines TopNews.

 

Yeah…and the problem with that is what?  ‘Bout time consumers get out from playing bottoms all the time.