Wall Street turned to Washington as the only way to create a coherent national financial (monopolistic) system with J. P. Morgan’s partner Henry P. Davison telling Congress flatly in 1912: “I would rather have regulation and control than free enterprise.” (in Gabriel Kolko: Main Currents in American History, 1984, p. 13)…But Kolko’s view is a vital corrective to current myths, making clear that as early as the founding of modern regulation in the Progressive Era business has played a leading role in creating regulation and has helped turn it into a cornerstone of corporate ascendency (over the common good)….
Global alliances link almost all of these giant oligopolistic competitors, and these vast networks not only help companies manage intense global competition but bring businesses together to create coordinated economic policy and political global agendas….At the heart of the new global order is the alphabet soup of new global institutions, from the WTO and the IMF to the World Bank, that help manage the world’s economy. While barely known to the public they are quietly assuming sovereign powers that deeply affect all our lives. They represent a kind of shadow economic government whose sovereignty extends to the entire planet. – Charles Derber: Corporation Nation, 1998, pp. 151-2, 274.
-Henry P. Davison
Of the 911,039 mortgages Clayton Holdings examined for its Wall Street clients–a sample of about 10 percent of the total mortgages that the banks intended to package into securities–only 54 percent were found to meet the underwriting guidelines. Standards deteriorated over time, with only 47 percent of the mortgages Clayton examined meeting the guidelines by the second quarter of 2007.
So, did Wall Street throw all those mortgages back into the pond as being too risky for securities they were going to sell to clients? Of course not–many were packaged right into their product. There were degrees of nefariousness: some Wall Street firms were better about including higher-quality mortgages in their mortgage-backed securities than others. For instance, at Goldman Sachs 77 percent of the nearly 112,000 mortgages reviewed met the guidelines, while at Citigroup only 58 percent did. At Lehman Brothers, which later filed for bankruptcy, 74 percent of the mortgages sampled and then packaged up as securities met underwriting guidelines.
In fact, the banks probably weren’t disappointed at all by the shaky status of many of these loans: in part because they could use the information that some of the mortgages were rotten to get a discount from the mortgage originators on the price paid for the entire portfolio. The people who should have been concerned were the investors who bought the securities from the Wall Street firms. But the amazing revelation of the Sacramento hearing was that the investment banks did not pass this very valuable information on to their customers. http://opinionator.blogs.nytimes.com/2010/10/14/how-wall-street-hid-its-mortgage-mess/?_r=0