Ron Cooke: Who Do We Blame for America’s Financial Mess?


06 Oct 2008
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Time for a reality check

The traditional checks and balances of America’s financial system have been deliberately bypassed. The Real Estate industry encouraged the production of very high risk mortgage applications. With the full knowledge and support of Congress, most of the Banking System ignored its responsibility to monitor the credit worthiness of mortgage applicants. Wall Street then sliced and diced these worthless loans into $$ billions of highly questionable securities called Collateralized Debt Obligations. In the process, everyone involved dipped their hands into the cookie jar. Millions and billions of dollars. Get rich selling worthless paper.

But our folly doesn’t end with mortgage market insanity. We have also created a colossal dog pile of derivative instruments tied to thin air, slopped at the trough of greasy debt, and turned Wall Street into a raucous gambling casino.  Financial chicanery has been promoted as "investment". Our banking system, which only works if there is an environment of trust and institutional integrity, must now deal with an overwhelming fear of deception. 

Dare I ask.  Are the we victims of fraud and misrepresentation?  Criminal conduct?   Gonad driven hubris?   Mindless greed?  Or just outright stupidity?

In theory, this financial mess should never have happened. The Bush Administration should have provided the leadership and management necessary to ensure America’s federal agencies were doing their job. And under our “system” of checks and balances, if the cognizant federal agencies continued to screw up, then Congressional oversight should have kicked in to fix any problems.

But the system is broken. Financial ruin is the norm. The stinking sludge runs both wide and deep. Ordinary Americans are being savaged by economic privation.

A Massive Failure Of Federal Governance.

The Bush Administration

At first blush, it would appear the Bush Administration has been in a state of bureaucratic stupor.  This situation has been developing for several years.  One would think someone on the Federal payroll would notice the smell of rotting value.  Now mind you, I’m just an old middle class American, but just what were America’s Federal agencies supposed to be doing?   Well.   Here is what they claim . . .

The Securities and Exchange Commission
“The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.”
The Federal Reserve
“The mission of the Federal Reserve is to provide the United States with a safe, flexible, and stable monetary and financial system.”
The Department of the Treasury
“Serve the American people and strengthen national security by managing the U.S. Government's finances effectively, promoting economic growth and stability, and ensuring the safety, soundness, and security of the U.S. and international financial systems.”
The Comptroller of the Currency, The Department of the Treasury
The Comptroller of the Currency is responsible for “ensuring a safe and sound national banking system for all Americans.”
Office of Thrift Supervision, The Department of the Treasury
“To supervise savings associations and their holding companies in order to maintain their safety and soundness and compliance with consumer laws, and to encourage a competitive industry that meets America's financial services needs. ...
“The OTS examines each savings association every 12-to-18 months to assess the institution’s safety and soundness, and compliance with consumer protection laws and regulations. In addition, examiners monitor the condition of thrifts through off-site analysis of regularly submitted financial data and regular contact with thrift personnel. OTS examinations and its ongoing supervisory oversight are tailored to the risk profile of each institution.”
The Justice Department
“To enforce the law . . . to provide federal leadership in preventing and controlling crime; to seek just punishment for those guilty of unlawful behavior; and to ensure fair and impartial administration of justice for all Americans.”

Now then.  Have these agencies done their job?   Can we trust their judgment?

You decide.

And what about Congress?

Who has ultimate oversight responsibility for America’s Federal Agencies?  Who holds hearings on agency operations?  Who has the responsibility to enact regulatory legislation? Who determines what these agencies are supposed to do and then monitors them to be sure they are meeting their legislative objectives?

Congress.   Republicans and Democrats.  There are two key committees. Let’s look at how they define their responsibility.

House (of Representatives) Financial Services Committee
“The Committee oversees all components of the nation's housing and financial services sectors including banking, insurance, real estate, public and assisted housing, and securities. The Committee continually reviews the laws and programs relating to the U.S. Department of Housing and Urban Development, the Federal Reserve Bank, the Federal Deposit Insurance Corporation, Fannie Mae and Freddie Mac, and International development and finance agencies such as the World Bank and the International Monetary Fund. The Committee also ensures enforcement of housing and consumer protection laws such as the U.S. Housing Act, the Truth In Lending Act, the Housing and Community Development Act, the Fair Credit Reporting Act, the Real Estate Settlement Procedures Act, the Community Reinvestment Act, and financial privacy laws.”
(The Senate) Committee on Banking, Housing and Urban Affairs
“(The) Committee on Banking, Housing and Urban Affairs  . . . (has responsibility for)  all proposed legislation, messages, petitions, memorials and other matters relating to . . .
  • Banks, banking, and financial institutions.
  • Control of prices of commodities, rents and services.
  • Deposit insurance.
  • Economic stabilization and defense production.
  • Federal monetary policy, including the Federal Reserve System.
  • Financial aid to commerce and industry.
  • Issuance and redemption of notes.
  • Money and credit, including currency and coinage.
  • Public and private housing (including veterans housing).
  • Such Committee shall also study and review on a comprehensive basis, matters relating to international economic policy as it affects United States monetary affairs, credit, and financial institutions; economic growth, urban affairs, and credit, and report thereon from time to time.”

Let us review the facts.  Do you believe Congress has done its job?  Did these Congressional committees perform their duties in a responsible manner?  Do you believe they should have been aware of the financial mess Wall Street was creating?

The Real Story


The Democrats will obviously blame the Bush administration for everything that has gone wrong. They conveniently forget that Liberal Democrats have been in charge of Congress while this mess was collecting in America’s financial toilet. The Republicans, bless their hearts, will continue to be totally confused by just about everything. Let’s face it. Neither the Democrats nor the Republicans have enough intellectual depth to even know what questions they should be asking. Even if they had the will. And do you really think  anyone in the Washington establishment will take any responsibility for this massive failure of the Federal regulatory system?

Every American should demand an answer to this one question: Did the Federal bureaucracy fail because it did not have the authority (which implies Congressional legislative failure), or did it refuse to pursue its responsibility (which may imply massive corruption)?   Either way, the Federal Government has effectively transformed trillions of dollars of stinking paper into what will become very suspect Treasury bonds.  New mortgages purchased by Fannie and Freddie will add to this dog pile of debt.   Add it all up. Current debt plus mortgage debt. America’s total Federal debt will exceed $12 trillion. That’s $39,400 per American.  Then add unfunded Social Security and Medicare obligations.  NO – we can not afford it.  The only recourse will be a devaluation of the dollar – all accompanied by a sharp increase in inflation, higher unemployment, declining “real” GDP, and the worst personal economic misery our nation has ever seen.

Is it time for real change?


We Americans know the “system” is not working. We know it is incredibly corrupt.  Incompetent.  And totally dysfunctional. The only question is: how long will this go on before we the people are so fed up our nation explodes with anger?

Obama will talk about change.  All political vapor.  He will carefully avoid mentioning our Democratic Congress had multiple opportunities to avoid this mess.  McCain will talk about change. But the Republicans are far too confused to be an effective legislative counterparty.  House Speaker Pelosi and Senate Majority Leader Reid continue to be models of vitriolic ideology. Don’t expect them to pursue a course of constructive leadership. And what about Senate Banking chair Dodd? Or House Financial Services chair Frank?  Did they play a key role in creating this mess in the first place?

Are you confident the Washington Establishment will do its job?  Will these individuals put the welfare of the American people before their own personal selfish best interest?


There is absolutely no excuse for the financial carnage that has occurred. Members of the House Financial Services Committee and Senate Banking Committee either knew, or should have known, that America was headed for financial disaster. But instead, our Federal system has failed the American people.  It is unlikely the Washington establishment will fix our financial system because politics and ideology will be more important than decisive action.  That can only lead to ill conceived legislation.  Followed by the misappropriation of funds.  Decisions based on political expediency rather than virtue.  And endless corruption.

It’s time for a radical change in the way we govern ourselves.  If we want effective government, we must establish a better system of management with strong, positive, and constructive leadership.