Great LtE on Wall Street Reform

I usually don't do this, but I must give props to local community organizer and progressive activist Marla Turner today. She wrote this awesome letter to the editor on financial regulatory reform, and it managed to get printed in both papers today!

On Monday, Citigroup announced it raked in $4.4 billion in the first quarter of this year and its stock went up. Last week, JP Morgan and Bank of America reported it earned $3.3 billion and $3.2 billion, respectively, during the same time.

They’re back in the black after Americans bailed them out (of the worst national economic debacle we’ve seen in decades), but Nevadans aren’t so fortunate. While Wall Street rejoices, thousands of Nevadans like myself are still making hard choices between food or medicine, shelter or education.

I’m proud of Senate Majority Leader Harry Reid of Nevada for having the courage to hold Wall Street accountable for the mess it created and insisting on financial reform. If folks don’t get behind Reid and get this done, Wall Street will still be posting record profits next year and Nevada will still be in the dumps.

And with Citigroup and Wells Fargo already trying to revive the very same "mortgage backed securities" scheme that helped cause the 2008 meltdown. OK, so maybe "mortgage backed securities" aren't inherently evil, but what is wrong is keeping investors in the dark on what they really are while this whole debt market remains mostly unregulated.

At the risk of redundancy, there is nothing intrinsically wrong with Mortgage Based Securities. They are a very useful way to provide liquidity in our financial markets. In all likelihood, the wary buyer will do some "diligence" and find out more about the loan level data, and the weights attached to the averages. One would think, "once burned, twice very very diligent." What is a bit disconcerting is that the banks would be moving back into the RMBS market without making it easier for investors to find loan level data, and without providing more initial public information about those "weighted averages."

The old argument used to obscure the nature of RMBS transactions said that the hoi polloi didn't need such information because, the bankers sniffed "These are for 'sophisticated' investors." After the average American taxpayer was put on the hook to bail out those 'sophisticated investors' it behooves us to (1) support the notion of exchanges on which these financial instruments can be sold, and (2) support the creation of independent clearinghouses that can scrutinize these deals so we don't have to.

We can't just keep making the same mistakes. It's nice to see all the banks benefitting after receiving all their TARP bailouts, but we the taxpayers can't keep holding the bag for them when their investments go south. And with Citi and Wells Fargo already jumping back into the "mortgage backed securities" game, we need to make sure the feds have the tools necessary to prevent another financial crisis like 2008's.