From the book The Trauma Myth: The Truth About the Sexual Abuse of Children and Its Aftermath by Susan A. Clancy.

I found the above article counter to my preconceived notions, but quite believable once the author explained.

I have been reading the book 13 Bankers, The Wall Street Takeover, and the Next Financial Meltdown, by Simon Johnson and James Kwak.

Simon Johnson is Ronald A. Kurtz Professor of Entrepreneurship at MIT’s Sloan School of Management and a senior fellow of the Peterson Institute for International Economics. He is coauthor, with James Kwak, of The Baseline Scenario, a leading economic blog, described by Paul Krugman as “a must-read” and by Bill Moyers as “one of the most informative news sites in the blogoshpere.”

James Kwak has had a successful business career as a consultant for McKinsey & Company and as a software entrepreneur.

There are too many important passages to quote here, but there are a few key ones that I want to remember.

                              INTRODUCTION                         5

  Why did this happen? Why did even the near-collapse of the finan-
 cial system, and its desperate rescue by two reluctant administrations,
 fail to give the government any real leverage over the major banks?

   By March 2009, the Wall Street banks were not just any interest
 group. Over the past thirty years, they had become one of the wealth-
iest industries in the history of the American economy, and one of the
most powerful political forces in Washington. Financial sector money
poured into the campaign war chests of congressional representatives.
Investment bankers and their allies assumed top positions in the
White House and the Treasury Department. Most important, as
banking became more complicated, more prestigious, and more lucra-
tive, the ideology of Wall Street -- that unfettered innovation and
unregulated financial markets were good for America and the world-
became the consensus position in Washington on both sides of the
political aisle. Campaign contributions and the revolving door be-
tween the private sector and government service gave Wall Street
banks influence in Washington, but their ultimate victory lay in shift-
ing the conventional wisdom in their favor, to the point where their

page 76 of 13 Bankers.

The total volume of private mortgage-backed securities (excluding those issued by Ginnie Mae, Fannie Mae, and Freddie Mac) grew from $11 billion in 1984 to over $200 billion in 1994 to close to $3 trillion in 2007.

page 117 of 13 Bankers.

Kevin Murphy, Andrei Schliefer, and Robert Vishny have argued that society benefits more when talented people become entrepreneurs who start companies and create real innovations than when they go into rent-seeking activities that redistribute rather than increase wealth. If this is true, then this diversion of talent to Wall Street constituted a real tax on economic growth over the last two decades.

Even though I have been saying that the diversion of talent to Wall Street is a major driver of us out-sourcing our technology, I recognize one weakness in the above quote.

As I have also said these ideas are not binary, either rent seeking is good or it is not. Or real innovations are good or they are not. The real issue is one of balance. Without sufficient rent-seeking activities, entrepreneurs would stymied by lack of capital. Too much rent-seeking and we lose too many entrepreneurs of “real” innovation.

THE BEST DEAL EVER                     121

THE GOLDEN GOOSE

The boom in real estate and finance in the 2000s resulted from the
explosive combination of a handful of financial "innovations" that were
invented or greatly expanded in the 1990s: structured finance, credit
default swaps, and subprime lending. Most financial regulators looked
on the creation of this new money machine with benevolent indiffer-
ence. Structured financial products were sold largely to "sophisticated"
investors such as hedge funds and university endowments and therefore
subject to limited oversight by the Securities and Exchange Commis-
sion; credit default swaps were insulated by regulatory inattention and
then by the Commodity Futures Modernization Act; subprime lending
was winked at by the Federal Reserve. That was how the financial sec-
tor wanted it, and Washington was happy to oblige.

THE BEST DEAL EVER                     123

Asset-backed structured products became Wall Street's new cash
cows, in the form of mortgage-backed securities (MBS) and their
cousins, collateralized debt obligations (CDOs). The original mortgage-
backed securities created by Ginnie Mae in the late 1960s were "pass-
through" securities: mortgages were combined in a pool, and each
security had an equal claim on the mortgage payments from that pool,
spreading the risk evenly. Private MBS, however, are typically divided
into different tranches, or classes, that have different levels of risk
and pay different interest rates. Because the "senior" tranches have the
first claim on all the mortgage payments, they have the least risk, and
the credit rating agencies routinely stamped them with their AAA
rating-the same rating given to U.S. government bonds. The "junior"
tranches are riskier, but therefore pay higher interest rates to investors.*

A CDO is similar, except that instead of being built out of whole
mortgages it is built out of mortgage-backed securities or securities
backed by other assets (such as credit card loans, auto loans, or student
loans)^ By building CDOs out of junior, high-yielding MBS tranches,

*In a stylized example, an MBS offering might be composed of 85 percent senior MBS and
15 percent junior MBS. If 5 percent of the underlying mortgages default, the junior
investors will lose one-third of their money, but the senior investors will lose nothing. The
senior investors only lose if over 15 percent of the underlying mortgages default. By con-
trast, in a pass-through MBS, there are no tranches; if 5 percent of the mortgages default, all
investors lose 5 percent of their money.

THE BEST DEAL EVER                     139

 A McClatchy investigation found that even as the housing market was
starting to crumble, Moody's was forcing out executives who ques-
tioned the agency's high ratings of structured products and filling its
compliance department with people who had specialized in giving
those ratings.53

See the March 4, 2003 article, Buffett warns on investment ‘time bomb’, for the following quote:

But Mr Buffett argues that such highly complex financial instruments are time bombs and “financial weapons of mass destruction” that could harm not only their buyers and sellers, but the whole economic system.

Remember the above snippets when you hear Warren Buffet’s testimony before the Financial Crisis Inquiry Commission on June 2, 2010.

As the largest single investor in Moody’s, he thought that there was no way for people to know in the midst of a bubble that they were in the midst of a bubble. So you could not fault Moody’s for the ratings that turned out to be not so good.

It pains me to have to post this item, Not in My Jewish Name, By Rob Kall.

I am a Jew and I am outraged and ashamed by the acts Israel has perpetrated. I am not a self hating Jew, not an anti-semite, as some religious extremist Jews have accused me and other Jews who criticize Israel.

This is what we said about George Bush’s actions – “Not in my name as a US citizen.”  I have even less control over what happens in Israel, but I want my own government to know that I do not support what Israel is doing.

Even more disturbing is the article posted as a link in one of the comments to the above, Obama’s Timidity and Deaths at Sea by Ray McGovern.

Even before I read the above two pieces, I had commented that Israel’s actions have shown that they have lost their minds.  They have gone so off track that they do not even know how to estimate the consequences of their actions anymore.

I was thinking of the similarity to the incident portrayed in the book and movie Exodus. In this incident, as I remember it, Jewish refugees from World War II were trying to run the British blockade against Jewish immigrants to Israel.  In this case, the blockade runners depended on the modicum of human decency that the British would have to display as this played out in the international press.

I am sure that current day Israeli politicians are well aware of that incident.  Its success was probably what frightened them most about the current attempt to duplicate it by the Palestinians and their sympathizers.

However, given their knowledge of this history, their response was the most foolish thing I have ever seen.

If the Israelis expected no resistance, then what was the necessity of the element of surprise in the commandos boarding the ship?  If the Israelis did expect resistance, then how stupid was it to deposit commandos into the midst of 600 protesters by dropping them one at a time down a rope from a helicopter?

Either way you look at it, you have to wonder how a friend should respond when he or she notices a person having gone off their rocker and starting to engage in indefensible behavior.  At some point a true friend must stop diverting their eyes when they see what is going on.

The incident referred to in this political cartoon could obviously never happen in Arizona. Right? Perhaps the cartoonist is even joking about it happening in Chicago.

Well, maybe not. The local NBC affilliate in Chicago has the story American Citizen Faced Deportation

And now, Gutierrez, who’s fighting for national immigration reform, wants answers.

“You know what this proves to you? That in Arizona, they want everybody to be able to prove they’re legally in the country. They want everybody to prove that they’re an American citizen. Here we had an American citizen, that the federal government, not state authorities, but the federal government, with all their technology and all their information capacity that they have, could not determine, for more than three days, his status as an American citizen. It’s very, very, very dangerous ground to tread,” the Chicago Democrat said.

I sent an email to Senator Scott Brown thanking him for his vote for the Senate Financial Reform bill.

He sent me the following reply:

Dear Mr. Greenberg, Thank you for expressing your thoughts on financial regulatory reform. As always, I value your input on this and other issues, and strive to keep you updated on the important issues facing us today. There is little disagreement that significant and forward thinking action is needed to properly address regulatory concerns in the financial industry. I am pleased that since joining the Senate we have moved on legislation to begin the process of repairing a regulatory system that did not work as it should have and contributed to the economic meltdown that shook our economy in 2008. This action, long overdue, will make sure that our regulatory structure catches up with the realities of today’s market to provide a safer and more secure economy to protect the financial future of all Americans. Although no bill will ever be perfect, and I remain deeply concerned that we need additional action to prevent another financial crises, this bill takes important steps towards greater market transparency and stronger consumer protection. Despite the contentious beginning to the Senate debate, I was pleased that there was an earnest effort by both parties to work together to amend and improve the bill on the floor. Without this compromise, taxpayers would still be completely on the hook for bailing out “too big to fail” firms in the future. After our experience with the $700 billion in emergency TARP fund which found its way into the hands of entities that were not entitled to it, we can all agree that we do not want taxpayers to be forced to bail out Wall Street again. The legislation takes steps to address several key issues that were at the heart of the recent meltdown, including systemic risk oversight, transparency in the derivatives market and the safety and soundness of banks. The bill also eliminates a government bureaucracy – the Office of Thrift Supervision – that was partly to blame for the financial crisis, and consolidates multiple consumer protection agencies into a single bureau within the Federal Reserve. Further, amendments that were agreed to sharply curtailed the Bureau’s ability to use a heavy hand in regulating our nation’s small businesses, which are critical economic engines and job creators. This bill in no way raises taxes, due to the elimination of a $50 billion bank slush fund, nor does it spend taxpayer money or allow the government the right to arbitrarily seize private property. Instead, it updates the rules of the road so that our financial sector watchdogs have the ability to regulate Wall Street traders that helped lead us into the financial crisis. The bill provides for a robust audit of the Federal Reserve’s unprecedented actions during the financial crisis, but does so without giving politicians the ability to interfere in future monetary policy. As many of you know, the Senate debated this bill for more than four weeks on the floor. During the process, I proposed or cosponsored 27 amendments, eight of which were agreed to by the Senate. In addition, as the process continued, I clearly stated that I would not go forward with bringing debate to a close until I received concrete, written assurances that any final bill would not include language that could potentially cripple insurance companies, mutual funds, banks and small businesses located throughout the country that had nothing to do with the financial crisis. I fought hard for these assurances, as these institutions are a critical component of the Massachusetts economy, and unfairly subjecting them to new restrictions could lead to further job loss at a most critical time. Only when I was satisfied with the progress of debate and received the appropriate guarantees from the Administration and leaders on the other side of the aisle, including the Senate Majority Leader and the House and Senate chairs of the Banking Committees, that the final legislation would address my concerns, could I support it in good conscience. I promised my constituents that I would look at each and every piece of legislation with an independent mind to see whether it would benefit our state and country, create jobs and help get our economy back on track. I felt that the financial reform legislation met these criteria, and I believe that the bill will continue to be improved by the bipartisan conference process with the House of Representatives that will resolve the differences between the two versions. Again, thank you for sharing your comments with me. As the legislative process continues on the financial regulatory reform bill, I will be sure to keep your views in mind. If you have any additional questions or comments, please feel free to contact me or visit my website at http://scottbrown.senate.gov.

Sincerely, Scott P. Brown United States Senator

Before his compromise there was a $50 billion fund paid for by the financial industry to close down failing banks. The money was not raised through taxes on individual taxpayers.

After the compromise, this fund, erroneously called a tax paid slush fund, was eliminated. It was not tax paid, and it was not a slush fund. Now the Federal Government will be on the hook to pay up-front costs to close failing banks with the hope of getting paid back when the pieces of the bank are sold off. So now the good Senator has assured us that the resolution of failing banks will be paid by the taxpayers, at least initially.

So despite the phony Republican rhetoric about not costing the taxpayers any money, the compromise does exactly the opposite of what they claim.

I guess it was too much to expect from Senator Brown that he could vote correctly and forego the obfuscation. Too bad, I could have almost liked the guy.

Rob Kall has posted this article on his opEd news web site.

A large part of the article is a plea for the President to take action to make sure the public is aware of all that is being done to solve the problem.

Such an open policy will help enlist ideas for solutions to the problem that may not have devised yet by BP and our government.

The article points out that it is also time when mentioning that these problems were inherited from the previous administration is no longer adequate.  The President has to start talking more about what he is doing to fix the problems whether inherited or not.

There are numerous suggestions in the article for fixing the situation.

Follow this link to the article by Peter Beinart in The New York Review Of Books.

As Rod Serling would say, “For your consideration”.