Paul Sweeney: De-regulation did not just happen. It was bought, partially! So much for the idea that the free marketeers won the battle for ideas with intellectual argument and the placement of ideological allies like Alan Greenspan in high position.
A most important study, published yesterday by the US based Centre for Public Integrity, a group of publicly-spirited investigative journalists, shows that the major subprime lenders in the US spent a massive $370m over the last decade to successfully lobby against regulation of their industry. The study will strengthen calls for stronger regulation of banking and related areas in the US, and maybe even here too.
Citigroup, Goldman Sachs JP Morgan and others, which have been bailed out by US taxpayers to the tune of $700bn so far, lobbied hard against stronger regulation of the subprime markets.
The group also paid donations to politicians, including Obama – spending a massive $2.2bn in contributions, the study found, over the decade. Barrack Obama received $14m and was among the top recipients, as was George Bush.
So much for the battle of ideas! Money buys influence. And who has the money? Banks and corporations.
That is why think tanks like TASC and the Centre for Public Integrity are so important.
The study's main findings include:
* The banks that funded the subprime industry were not victims of an unforeseen financial collapse, as they have sometimes portrayed themselves, but enablers that bankrolled the type of lending threatening the financial system.
* At least 21 of the top 25 subprime lenders were financed by banks that received bailout money
* Twenty of the top 25 subprime lenders have closed, stopped lending, or been sold to avoid bankruptcy. Most were non-bank lenders.
* Eleven of the lenders on the list, including four recipients of bank bailout funds, have made payments to settle claims of widespread lending abuses.
* U.S. and European banks poured huge sums into the subprime lending market due to unceasing demand for high-yield, high-risk bonds backed by home mortgages.
* The banks — including Lehman Brothers, Merrill Lynch, Citigroup, Credit Suisse First Boston, and Goldman Sachs & Co — made huge profits while their executives collected handsome bonuses until the bottom fell out of the real estate market.
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Paul Sweeney is former Chief Economist of the Irish Congress of Trade Unions. He was a President of the Statistical and Social Enquiry Society of Ireland, former member of the Economic Committee of the ETUC, a member of the National Competitiveness Council of Ireland, the National Statistics Board, the ESB, TUAC, (advisor to OECD) and several other bodies. He has written three books on the Irish economy and two on public enterprise, including The Celtic Tiger; Ireland’s Economic Miracle Explained and Selling Out: Privatisation in Ireland, chapters in other books and many articles on economics.