(Community Matters) A reader wrote to note that ARMs were created (or began being marketed) under Carter and that abuses were taking place under Clinton, as identified by Clinton’s Federal Trade Commission. My response to his comment:
Jim, no question about creation of ARMS, nor even initial reports of abuse. You’ll note that the concern by a governing federal agency was investigated and cited under Clinton’s Federal Trade Commission. The problem isn’t that the risk wasn’t identified; the problem is that the FTC was initially weakened and politicized under GW Bush. His first appointment as chair of the FTC: a longtime friend and Republican Party official without credentials, Janet Dempsey Steiger, the wife of a Republican Congressman. (Reminiscent of atta-boy Brownie). And, guess who 11th-hour slipped a 262-page bill deregulating swaps into a spending measure? Phil Gramm. And guess what’s been the real culprit in this subprime mortgage financial crisis? Credit default swaps, what Warren Buffett calls financial weapons of mass destruction. Estimates run as high as $62 trillion in CDS exposure, i.e., that’s more than the 2007 $53 trillion estimated world GDP. Seriously, Phil’s responsible for the deregulation of this market. btw, swaps in of themselves aren’t bad things; they’re important tools in financial markets. If we had regulated financial institution capital exposure as well as credit underwriting standards, we wouldn’t be in this mess. Regrettably, the events leading up to this financial crisis have been managed every bit as competently as Katrina relief efforts
Community Matters 