The Shock Doctrine

Disaster Capitalism in Action: regulation

Wall Street Stealth Lobby Defends $35 Billion Derivatives Haul

Christine Harper, Matthew Leising and Shannon Harrington, Bloomberg News, August 31, 2009

"Wall Street is suiting up for a battle to protect one of its richest fiefdoms, the $592 trillion over-the-counter derivatives market that is facing the biggest overhaul since its creation 30 years ago.

"Five U.S. commercial banks, including JPMorgan Chase & Co., Goldman Sachs Group Inc. and Bank of America Corp., are on track to earn more than $35 billion this year trading unregulated derivatives contracts. At stake is how much of that business they and other dealers will be able to keep....

"The Washington fight, conducted mostly behind closed doors, has been overshadowed by the noisy debate over health care. That’s fine with investment bankers, who for years quietly wielded their financial and lobbying clout on Capitol Hill to kill efforts to regulate derivatives. This time could be different. The reason: widespread public and Congressional anger over the role derivatives such as credit-default swaps played in the worst financial crisis since the Great Depression."

By Switching Their Charters, Banks Skirt Supervision

Binyamin Appelbaum, Washington Post, January 22, 2009

"At least 30 banks since 2000 have escaped federal regulatory action by walking away from their federal regulators and moving under state supervision, taking advantage of a long-standing system that allows banks to choose between federal and state oversight, according to a Washington Post review of government records. The moves, known as charter conversions, highlight the tremendous leverage that banks hold in their relationships with government supervisors.

"Since 2000, about 240 banks have converted from federal to state charters. Regulators and bank executives say many of those institutions simply wanted to save money. While national charters allow banks to operate more easily across state lines, state charters are cheaper. State regulators also advertise their accessibility and say they better understand local conditions and concerns.

"But the pursuit of leniency is an important undercurrent. About 12 percent of the banks that moved to state charters escaped federal regulatory actions, and experts on bank oversight say such cases are the tip of a broader pattern. They note that some banks convert in anticipation of a public enforcement action, or after persuading federal regulators to terminate an action....

"'The whole framework of our system was set up at a different time in American history, and it's really much more a matter of history than logic,' said Eugene Ludwig, who served during the 1990s as Comptroller of the Currency, the chief regulator for national banks."

Lobbyists Push for Blank Check Bailout Package Free of Regulations

Elizabeth Williamson , Wall Street Journal, September 20, 2008

"House Republican staffers met with roughly 15 lobbyists Friday afternoon, whose message to lawmakers was clear: Don't load the legislation up with provisions not directly related to the crisis, or regulatory measures the industry has long opposed.

"'We're opposed to adding provisions that will affect [or] undermine the deal substantively,' said Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable, whose members include the nation's largest banks, securities firms and insurers....

"Brokerage firms are fighting limits on executive compensation for firms that participate in the package, saying that particularly in an industry under siege, the limits will hurt their ability to find and retain top brass. The industry could lose that one: proposals to limit executive pay enjoy bipartisan support and backing from the Republican and Democratic presidential candidates."

Industry Resisted Warning System To Prevent Train Crashes

Randal C. Archibold, New York Times, September 14, 2008

"Federal investigators said Sunday that a collision warning system they have long called for could have prevented the head-on crash here [Los Angeles] last week between a commuter train and a freight train that killed 25 people.

"The system, known as positive train control and in use sporadically in parts of the country, “would have prevented this accident,” said Kitty Higgins, a member of the National Transportation Safety Board, which is investigating the accident.

"The board has long pressed for such a system on all trains, but the industry has resisted on the grounds that it is expensive and in some cases not reliable."

Scientists Say Formaldehyde in FEMA Trailers Is Due to Poor Construction and Lax Federal Regulation

Spencer S. Hsu, Washington Post, July 3, 2008

"High levels of formaldehyde found in trailers provided to Hurricane Katrina evacuees on the Gulf Coast probably resulted from cheap wood and poor ventilation in designs used by manufacturers under permissive government standards, federal scientists reported yesterday. An analysis by researchers for Lawrence Berkeley National Laboratory found that four Katrina trailers emitted the toxic chemical at levels four to 11 times as high as those found in typical U.S. homes. The study looked at both commercially available units and ones custom-built for the Federal Emergency Management Agency in 2005 and 2006.

"The new findings appear to confirm the role that manufacturers' practices and weak federal regulation played in the public health disaster after the August 2005 storm."

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