The presidential candidates sparred over financial reform in Wednesday night’s debate, with Mitt Romney attempting to tack to the center, proclaiming his support for Wall Street regulations. Republicans, however, have fought tooth-and-nail to neuter or eliminate the key agencies charged with writing and enforcing those regulations, among them the Consumer Financial Protection Bureau, which Romney has derided as “the most powerful and unaccountable bureaucracy in the history of our nation.”
This week, however, brought fresh evidence of the need not only for strong regulations but strong regulators, like the CFPB, as well, to enforce those rules and police Wall Street’s financial institutions. New York Attorney General Eric Schneiderman filed suit this week against JPMorgan Chase for ”multiple fraudulent and deceptive acts” at Bear Stearns, which is now owned by JPMorgan, in the run-up to the financial crisis. In fact, the fraudaulent behavior was so bad, according to the civil complaint filed Monday, that Wall Street traders were circulating rumors of a full-blown meltdown at Bear Stearns more than a year before the firm nearly collapsed, triggering the financial crisis:
By the end of 2006, [Residential Mortgage-Backed Securities] traders at other banks were beginning to hear “rumors of a credit meltdown at [Bear Stearns]” … According to the trader who had heard the rumor, the “precise description” of Bear Stearns’ state at that time was “def co[n] 3” - or “defensive condition 3” - the military term signifying a heightened state of alert. The trader sharing the “rumors” then pointedly remarked: ”little due diligence upfront makes for a bad day 12 months later.”
Wall Street regulators were apparently so ineffectual that a full year of rumors about a “meltdown” at one of the world’s largest financial institutions escaped their attention. Now, Republicans are working relentlessly to gut the very institutions charged with preventing a similar meltdown from happening again.