Here's why the politicians fought against regulation of Wall Street banks

The $700 billion taxpayer giveaway to the Wall Street banks was passed and signed into law yesterday in hopes that throwing money at the problem will solve it.

"In hopes..." Yeah that's all it is because no one really knows what's in the bailout bill or how it is supposed to work. All the politicians know is that when they objected to handing out large gobs of taxpayer money to no one knows who for no one knows what last Monday, the Dow Jones Industrial Index chastised them by dropping $777 the same day. So they got scared they wouldn't be reelected and handed out the taxpayer funds as fast as they could.

How did Congress and Wall Street let this mess get so bad? Wall street fought regulations that would have prevented it tooth, nail and with many, many dollars to politicians, and the politicians happily played along and let themselves be bought. Here's the story from McClatchy News:

Since 2001, eight of the most troubled firms have donated $64.2 million to congressional candidates, presidential candidates and the Republican and Democratic parties, according to data from the nonpartisan Center for Responsive Politics.

The donors include investment bankers Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch, Morgan Stanley, insurer American International Group and mortgage giants Fannie Mae and Freddie Mac. Since March, with the exception of Goldman Sachs and Morgan Stanley, all of these companies have been bailed out by the government, sold to other companies at deeply discounted prices or simply failed.

Both political parties have become beholden to Wall Street.

Legislators failed in several instances to conduct oversight hearings or to raise concerns as the Bush administration adopted rules that fed the mortgage frenzy and set Wall Street on a path to disaster. [Snip]

Some state regulators, recognizing early signs of trouble in housing markets, sought help from Congress when the Bush administration adopted rules barring states from enforcing tough laws targeting predatory lending — the practices that were enabling unqualified applicants to obtain subprime mortgages.

With Wall Street serving a key role in buying, bundling and reselling subprime mortgages, state officials couldn't get Congress to intervene, said John Ryan, the executive vice president of the Conference of State Bank Supervisors.

"You could say that the finance industry got their money's worth by supporting members of Congress who were inclined to look the other way," said Lawrence Jacobs, the director of the University of Minnesota's Center for the Study of Politics and Governance.

"When the spotlight's on, sometimes reason carries," Ryan said. "But when it's not on, all of the influence is overwhelming." [Snip]

"It's unusual that Congress lets a major new program go through without at least oversight hearings," Coffee said. "And they didn't happen."

After the SEC changed its rules, Coffee said, Merrill Lynch's and Morgan Stanley's debt-to-equity ratios soared to 40-to-1 and 37-to-1 respectively from the old limit of 12-to-1, leading to Bank of America's $50 billion purchase of Merrill and contributing to calls for a bailout to rescue Morgan Stanley and other Wall Street giants.

The banking committees also took no action when the Department of Housing and Urban Development adopted a rule change that made it easier for mortgage brokers to collect hefty incentive payments for arranging loans with above-market interest rates for marginal buyers.

The panels also watched from the sidelines when the federal Comptroller of the Currency preempted more than 30 state attorneys general from enforcing state laws holding investment banks liable for predatory lending practices on subprime mortgages.

Ryan, of the Conference of State Bank Supervisors, said he was "cut off at the knees" when he tried to fight the Bush administration's ruling on predatory pricing regulation.

He said the state officials agreed to "make as much noise as we can," but recognized that they were facing banking and securities industries with enormous influence from years of financial support to members of Congress.

This is the Reagan Revolution at work. Anyone trying to get a loan today can see the inevitable result of the Reagan Revolution so-called "free market."