Cernig at C&L provides more background on Paulson’s role in the origins of the crisis

Cernig and Crooks and Liars normally sticks to international affairs and US politics but here he provides some more detail into Henry Paulson’s role in reducing regulation of investment banks (shifting to ’self-regulation’ by the banks) and loosening the net capital rule (which allowed investment banks to increase their leverage, thereby increasing the size of their returns and reducing their ability to absorb losses).  My post on the subject can be found here.

(I really have to wonder how anyone can make the case that self-regulation is an improvement.  Would that mean that regulation was getting in the way of safe business before?)

Cernig continues by providing a fairly pessimistic (translation: realistic) assessment of the TARP’s function in simple terms, basically asserting that it only functions to improve the balance sheets for the financial companies whose lobbying and self-destructive behaviour are at the heart of this crisis’ origins, but only the surface of the crisis as it stands now.

In a surprising sight to see at a solidly liberal and, at times (depending on a post’s author) stridently Democratic blog, Cernig provides a valuable service to C&L’s almost entirely liberal/Democratic audience by revealing how small the difference in financial sector contributions are between Democrats and Republicans.

I hope this post, if nothing else, helps to explain why a fatally flawed and wasteful bill was passed through the Senate and the House of Representatives, heavily greased with bacon fat, with solid Democratic support.

This bill is specifically designed to trade taxpayer funds for financial institutions’ toxic assets.  And the “$2 billion in bipartisan donations (44% to Dems, 56% to Repubs) since 1990″ were designed to make sure the financial sector’s well-being, inexorably linked to the electoral well-being of many Congressmen and Senators, would be at the forefront of government concerns.

… and the cow goes moo