More On The Financial Mess

The AP covers how, in 2005, the Bush Administration's contemptuousness of regulation and deference to lobbyists led to its rejecting regulations that could have helped diminish the bad lending practices that contributed to the housing bubble.

The Bush administration backed off proposed crackdowns on no-money-down, interest-only mortgages years before the economy collapsed, buckling to pressure from some of the same banks that have now failed. It ignored remarkably prescient warnings that foretold the financial meltdown, according to an Associated Press review of regulatory documents.

"Expect fallout, expect foreclosures, expect horror stories," California mortgage lender Paris Welch wrote to U.S. regulators in January 2006, about one year before the housing implosion cost her a job.

Bowing to aggressive lobbying — along with assurances from banks that the troubled mortgages were OK — regulators delayed action for nearly one year. By the time new rules were released late in 2006, the toughest of the proposed provisions were gone and the meltdown was under way.

Also, CJR covers a Wall Street Journal article observing that, while the financial industry is presently being given a free pass for the incompetence of its management, it has a lot more in common with the auto industry than Congress has so far acknowledged:

For their part, banks have found lots of causes for their predicament aside from their own failings. The crisis, they have argued, is down to an impossible-to-predict perfect storm, predatory hedge funds, panicked investors, unrealistic accounting rules and economic changes that emerged so quickly there was no way to be prepared for them.

If only. The reality is the crisis is due to bad lending and investment decisions. And those, after all, form the core of the banking business. In auto terms, it’s as if banks designed cars that suffer from catastrophic mechanical failures, or can’t be driven during snow storms.

CJR concludes that the author is "right to point out there’s more urgency with fixing the banking system, and right to point out that doesn’t mean they should come out looking the same."Bush