Quoted from The Mercenary's WSJ quote:
Quote:
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To review, a critical ingredient in the meltdown was the Basel banking standards pushed by the Federal Reserve. Among other problems, Basel allowed Wall Street firms to claim that highly-rated mortgage-backed securities on their books were almost as good as cash as a capital standard.
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How conveniently they rewrite history. But then the WSJ that reports the news is into facts. The WSJ that has opinions can forget those facts. They are two separate organizations.
Basel did not *allow* Wall Street firms to run up a 30:1 ratio. Basel I (that the George Jr administration impeded) required banks to maintain equity. Meanwhile, Wall Street got exemptions from the George Jr administration and created new financial instruments (Credit Default obligations, SIVs, etc) to bypass regulations and Basel I. For example, AIG wrote insurance policies so complicated as to make them exempt from insurance regulation. Today we know what those loopholes created.
Basel II was designed to close those loopholes. But again, George Jr's administration refused to let Basel II be implemented. That WSJ opinion also forgets to mention that part. But then the opinion is about promoting a political agenda - and therefore forgets all the facts.
As any MBA or stock broker will tell us, profits (not servicing America) is the only purpose of business. Basel II would have diminished profits by protecting banking stabity. MBAs and their political extremist supporters feared responsible policies - even delayed or subverts Basel I & II. The opinion even conveniently forgets to mention both Basels.
Basel I did not *permit* those economic threats. Those threats were created to get around Basel I and other regulations. Basel II, that would have addressed those new financial instruments, was simply subverted by the George Jr administration ... so that Wall Street banks could run up 30 to 1 debt to equity ratios.