The ‘Money Industry’ bought control of America and, as such, bought control of the American political system and, in the process, betrayed America’s trust in them. They are still in control and there is no end in sight. Words: 1611

In further edited excerpts from the original article* by Harvey Rosenfield (www.wallstreetwatch.org), President of the Consumer Education Foundation, he goes on to say:

Banking with Credit Card

Over the last decade, Wall Street showered Washington with over $1.738 billion in supposed ‘campaign contributions’ and another $3.441 billion on 2,996 officially registered lobbyists whose job it was to press for deregulation. In return for the investment of this $5.179 billion, the Money Industry was able to get rid of many of the reforms enacted after the Great Depression and to operate, for most of the last ten years, without any effective rules or restraints whatsoever.

The Transfer of Power Took 25 Years

• Beginning in 1983 with the Reagan Administration, the U.S. government acquiesced to accounting rules adopted by the financial industry that allowed banks and other corporations to take money-losing assets off their balance sheets in order to hide them from investors and the public.

• Between 1998 and 2000, Congress and the Clinton Administration repeatedly blocked efforts to regulate “financial derivatives” — including the mortgage-related credit default swaps that became the basis of trillions of dollars in speculation.

• In 1999, Congress repealed the Depression-era law that barred banks from offering investment and insurance services, and vice versa, enabling these firms to engage in speculation by investing money from checking and savings accounts into financial “derivatives” and other schemes understood by only a handful of individuals.

• Taking advantage of historically low interest rates in the first few years of this decade, mortgage brokers and bankers began offering mortgages on egregious terms to purchasers who were not qualified. When these predatory lending practices were brought to the attention of federal agencies, they refused to take serious action.

Worse, when states stepped into the vacuum by passing laws requiring protections against dirty loans, the Bush Administration went to court to invalidate those reforms, on the ground that the inaction of federal agencies superseded state laws.

• The financial industry’s friends in Congress made sure that those who speculate in mortgages would not be legally liable for fraud or other illegalities that occurred when the mortgage was made.

• Egged on by Wall Street, two government-sponsored corporations, Fannie Mae and Freddie Mac, started buying large numbers of subprime loans from private banks as well as packages of mortgages known as “mortgage-backed securities.”

• In 2004, the Securities and Exchange Commission, now operating under the radical deregulatory ideology of the Bush Administration, authorized investment banks to decide for themselves how much money they were required to set aside as rainy day reserves. Some firms then entered into $40 worth of speculative trading for every $1 they held.

• With the compensation of CEOs increasingly tied to the value of the firm’s total assets, a tidal wave of mergers and acquisitions in the financial world — 11,500 between 1980 and 2005 — led to the predominance of just a relative handful of banks in the U.S. financial system. Successive administrations failed to enforce antitrust laws to block these mergers. The result: less competition, higher fees and charges for consumers, and a financial system vulnerable to collapse if any single one of the banks ran into trouble.

• Investors and even government authorities relied on private “credit rating” firms to review corporate balance sheets and proposed investments and report to potential investors about their quality and safety.

But the credit rating companies had a grave conflict of interest: they are paid by the financial firms to issue the ratings. Not surprisingly, they gave the highest ratings to the investments issued by the firms that paid them, even as it became clear that the ratings were inflated and the companies were in precarious condition. The financial lobby made sure that regulation of the credit ratings firms would not solve these problems.

None of these milestones on the road to economic ruin were kept secret. The dangers posed by unregulated, greed-driven financial speculation were readily apparent to any astute observer of the financial system but few of those entrusted with the responsibility to police the marketplace were willing to do so and those officials in government who dared to propose stronger protections for investors and consumers consistently met with hostility and defeat. The power of the Money Industry overcame all opposition, on a bipartisan basis.

Derivatives Were Their Weapons of Mass Destruction

As Franklin Roosevelt observed seventy years ago, “our enemies of today are the forces of privilege and greed within our own borders” and today their weapons of mass destruction were derivatives: pieces of paper that were backed by other pieces of paper that were backed by packages of mortgages, student loans and credit card debt, the complexity and value of which only a few understood.

America’s economic system is where it is today because gambling became the financial sector’s principal preoccupation. The pile of chips grew so big that the Money Industry displaced real businesses that provided real goods, services and jobs.

The Purchase of America was a LBO

The American consumers are not to blame for this debacle nor those who used credit in an attempt to have a decent quality of life, nor those who agreed to accept the amazing terms for mortgages and finding out later that they had been misled and could not afford the loan at the real interest rate buried in the fine print. Instead of assuming any responsibility for living beyond their means Americans are only to blame for allowing Wall Street to do what it calls a leveraged buy out of our political system by spending a relatively small amount of capital in the Capitol in order to seize control of our economy.

The Privileges of the Financial Oligarchy are Being Preserved

The moment the Money Industry realized that the casino had closed, it turned — as it always does — to Washington, this time for the mother of all favors: a $700 billion bailout which was quickly extended to include a feast of discount loans, loan guarantees and other taxpayer subsidies to the tune of at least $8 trillion so far. Then, panicked by Wall Street’s threat to pull the plug on credit, Congress rebuffed efforts to include safeguards on how taxpayer money would be spent and accounted for.

The bankers used the bailout monies to pay bonuses, to buy back their own bank stock, or to build their empires by purchasing other banks with very little of the money being used for the purpose it was ostensibly given: to make loans.

Washington’s latest giveaway — the Greatest Wall Street Giveaway of all time — has not fixed the economy but that, at this very moment of national threat, the banks, hedge funds and other parasite firms that crippled our economy are pouring money into Washington to preserve their privileges at the expense of the rest of us.

Washington Was Paid Off

That’s why you won’t hear anyone in the Washington establishment suggest that Americans be given a seat on the Board of Directors of every company that receives bailout money or that credit default swaps and other derivatives should be prohibited, or limited just like slot machines, roulette wheels and other forms of gambling.

In most of the United States you can go to jail for stealing a loaf of bread but if you have paid off Washington, you can steal the life-savings, livelihoods, homes and dreams of an entire nation, and you will be allowed to live in the fancy homes you own, drive multiple cars, throw multi-million dollar birthday parties, etc. and virtually get away with it.

Sure, you might not be able to get your bonus this year or, worst come to worst, if you are one of the very unlucky few unable to take advantage of the loopholes in the plan announced by the Treasury Secretary Geithner, you may end up having to live off your past riches because you can only earn a measly $500,000.

The Money Industry Remains in Charge

Since President Obama’s key appointments to the Treasury, the SEC and other agencies, like their predecessors, are veterans of the Money Industry the Money Industry remains in charge of the federal agencies and keeps our elected officials in its deep pockets and, as such, nothing will change and that if America is to recover from this economic debacle that we find ourselves in, its people must return to the principles that made it great — hard work, creativity, and innovation — and both government and business must serve that end. Washington must serve America, not Wall Street. Things will not change so long as Americans acquiesce to business as usual in Washington. It’s time for Americans to make their voices heard.

Wall Street is presently humbled, but not prostrate. Despite siphoning trillions of dollars from the public purse, Wall Street executives continue to warn about the perils of restricting “financial innovation” even though it was these very innovations that led to the crisis in the first place.

With Wall Street having destroyed the system that enriched its high flyers, and plunged the global economy into deep recession, it’s time for Congress to tell Wall Street that its political investments have also gone bad. This time, legislating must be to control Wall Street, not further Wall Street’s control.

*http://www.wallstreetwatch.org/reports/introduction.pdf

Editor’s Note:
- The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
- Permission to reprint in whole or in part is gladly granted, provided full credit is given.
- Sign up to receive every article posted via Twitter, Facebook, RSS feed or our Weekly Newsletter.
- Submit a comment. Share your views on the subject with all our readers.
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As a function of the financial crisis we are working through, your finances may be muddled or disorganized. Do yourself a favor and get your financial house in order by finding a dedicated, competent financial advisor that places your interests first. Words: 847

In further edited excerpts from the original article* Wade Slome (www.InvestingCaffeine.com) goes on to say:

It has been an incredible roller coaster ride over the last two years, both on the way down, and for those still in the game…on the way up. Most prospects I come across are perplexed with how quickly their portfolios unraveled in 2008 and are scratching their heads with respect to how quickly markets bounced back.

For retirees, and those who thought they were near retirement, the impact of this financial crisis has been devastating. Compounding the mental anguish, I see many investors knee-jerking their way into sub-optimal decisions.

Most frequently, I see investors parked in a cave earning next to nothing on their illiquid assets and/or piling into long duration bonds. Investors often are unaware of the risks associated with the long-in-the-tooth, multi-decade bull run in the bond market …caveat emptor!

What people don’t realize or focus on is the sensitivity to changes in interest rates (called “duration” – the equivalent of “beta” for stocks).

Moreover, investors are not managing for inflation risk. While many retirees in their 50s and 60s relax in their bunkers, earning next to nothing on their CDs and money market accounts, inflation is a huge risk as medical, energy, food, leisure, and general living expenses continue to rise with government fiscal monetary and fiscal policies potentially accelerating the escalation of price levels.

To add fuel to the fire, life expectancies continue to increase. Quite simply, many retirees who don’t have their money invested EFFICIENTLY, run the risk of outliving their nest eggs. This is no scare tactic, this is plain reality.

O.K., O.K., So What’s a Person To Do?
Determine whether you have the time, discipline, and emotional make-up to handle your own finances. Most people think they can succeed on their own, much like the vast majority of people think they are above average drivers. The data shows a different fact pattern. An 18 year study compiled by legendary Vanguard Group founder, John Bogle has shown that the average investor gets destroyed not only by fees, taxes and transactions costs, but also more importantly due to emotional errors and lack of investing discipline.

If you outsource your taxes to a professional CPA, and your estate planning (e.g., will and trusts) to attorneys, then why wouldn’t you seriously consider outsourcing your investments to a professional? “Professional” is the operative word, because unfortunately many people in the investment industry are more akin to aggressive salespeople than they are professional investors.

Since there are so many sharks in the industry, it behooves you to perform your due diligence on advisors under consideration. Here are some items to mark off on your checklist:

1) Fiduciary Duty:
Does the advisor you’re looking at work for a RIA (Registered Investment Advisor), which has a lawful fiduciary duty to make investment decisions in your best interest. Most brokers only have a “suitability” standard, which is a much lower hurdle to meet.

2) Compensation:
How is the advisor compensated? Many advisors are incentivized to sell, sell, sell because they make commissions by shuffling your investments around. You’re much better off by aligning with a “fee-only” advisor who has a natural incentive in place to make decisions that will grow your assets.

3) Experience/Credentials:
Find out how committed your advisor is to their trade. Would you want a nurse to perform your brain surgery or a flight attendant to fly your plane? Probably not. Find out if your advisor has ever invested money or have they just sold products? Do they hold the CFP (Certified Financial Planner®) certification and/or the CFA (Chartered Financial Analyst) designation? Do they have relevant degrees in the field of finance or economics? Less than 5% of all advisors have the combination of these credentials.

4) Investing Style:
Discover whether your advisor uses the same investments in their personal portfolio that they recommend to you? If not, why not? It makes much more sense to partner with advisors that eat their own cooking.

5) Reputation:
With proper research, investors can become more comfortable with the professional chosen and the status of the firm employing the manager/professional. Several government and professional regulatory organizations, such as the National Association of Securities Dealers (NASD), the Securities & Exchange Commission (SEC), your state insurance and securities departments, and CFP Board keep records on the disciplinary history of the investment and financial planning advisors. Ask what organizations the professional is regulated by and contact these groups to conduct a background check.

Following these simple steps and you can weed out many of the shoddy financial advisors that have conflicts of interest and/or lack the skills and experience to invest your money prudently.

*http://investingcaffeine.com/2009/10/21/what-to-do-now-time-to-get-the-house-in-order/

Editor’s Note:
- The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
- Permission to reprint in whole or in part is gladly granted, provided full credit is given.
- Sign up to receive every article posted via Twitter, Facebook, RSS feed or our Weekly Newsletter.
- Submit a comment. Share your views on the subject with all our readers.
- Buy the book below from Amazon. It’s pertinent to this article and inexpensive too.