Commodity Futures Modernization Act & Gramm-Leach-Bliley Act

[HT:TS {top half, re: the 'under regulated' argument}]

The housing bubble was the result of the Ponzi-scheme antics of those other financial entities: commercial banks, stockbrokers and hedge funds, which were allowed in a GOP-deregulated market to get into the "swap"

business. Through the rampant reselling of loans, the obligation to collect on a loan was divorced from the act of selling it in the first place, so who cared if the recipient of the loan was not at all qualified or the appraisal of the property value was inflated. [snip]

The mortgage swaps distancing the originator of the loan from the ultimate collector were only made legal as a result of the Commodity Futures Modernization Act that former Texas Republican Sen. Phil Gramm pushed through Congress just hours before the 2000 Christmas recess. Gramm, until recently co-chair of the McCain campaign, also had co-authored the Gramm-Leach-Bliley Act that became law in 1999, with President Bill Clinton's signature. That gem destroyed the Depression-era barrier to the merger of stockbrokers, banks and insurance companies.

Those two acts effectively ended significant regulation of the financial community, and no wonder we have witnessed an even more rapid and severe meltdown in housing values than during the Great Depression.

[BUT: in reading wiki on the Gramm-Leach-Bliley Act, we learn that:

"Crucial to the passing of this Act was an amendment made to the GLBA, stating that no merger may go ahead if any of the financial holding institutions, or affiliates thereof, received a "less than satisfactory [sic] rating at its most recent CRA exam", essentially meaning that any merger may only go ahead with the strict approval of the regulatory bodies responsible for the CRA.[3]. This was an issue of hot contention, and the Clinton Administration stressed that it "would veto any legislation that would scale back minority-lending requirements." [4]

[4] = ^ Compromise over Community Reinvestment Act crucial to repeal of Glass-Steagall

[I.e., the act originally encourage more competition by leveling the playing field for investment banks that had already been opened to commercial banks - but to get passed it had to retain this critical poison pill... I.e.2: political correctness above sound financial principle - and again we're back to government meddling as the genesis of the problem - meddling consistently promoted by one particular political party...]

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