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Draft Letter Calling for a Special Prosecutor to Investigate Financial Collapse
By BrianHull | May 8, 2009
RIPDA Position Statement on the Economic Crisis
The current economic crisis threatens to be worse than the Great Depression, yet our federal government hasn’t shown any indication that it will thoroughly investigate how it happened and why. Instead, we’ve only been told that our economy will collapse unless we give unprecedented amounts of public money to the very financial markets whose actions have created this crisis. It is unwise to carry on in the same way without fully understanding what occurred in the financial markets to bring us to this outcome.
To this end, we advocate for the authorization of a special prosecutor with full subpoena power to investigate any person or institution that had a major role in creating or exacerbating this crisis. A precedent for this has already been set when in 1932 the U.S. Senate Committee on Banking and Currency began the Pecora Investigation to determine the causes of the Wall Street Crash of 1929.
A thorough investigation is necessary to learn the facts in order to guide corrective legislation and to prevent further financial crises. The public has suffered dearly in terms of lost employment, lost retirements, lost homes, lost health care, as well as the staggering sums of money paid to banks instead of being spent for other public needs. These catastrophic losses have occurred to the public even though they have done nothing wrong.
In particular, the following subjects need to be critically examined by a special prosecutor with unrestricted subpoena power:
1) To what extent did the repeal of the Glass-Steagall Act by the Gramm-Leach-Billey Act (1999) contribute to the economic crisis?
2) To what extent did the unregulated nature of Credit Default Swaps (CDS) contribute to the crisis? Furthermore, because CDSs are essentially derivative contracts more akin to an insurance policy rather than a financial instrument, should they be regulated according to insurance industry standards?
3) To what extent did members of Congress and/or their family members benefit from the deregulation of derivatives and CDs and did the potential monetary gains influence the method of passage of specific deregulation (the legislation was added to the 11,000 page Consolidated Appropriations Act of 2001 leaving no time for review it before its passage)? Specific individuals to investigate in this regard are: Senators Gramm, Lugar and Ewing.; Larry Summers, then Treasury Secretary, now in the President Obama’s National Economic Council; Alan Greenspan; Arthur Levitt.
4. To what extent has the creation of specific derivatives led to payment avoidance of U.S. taxes? These derivatives should be identified and outlawed.
5. Should a tax be levied on any or all financial instruments in order to assist investment banks in the repayment of public monies granted from the Troubled Asset Relief Program (TARP)? Reliable sources estimate that a small 0.1% tax on such instruments could generate about $500 billion each year.
6. Would the direct lending from the federal government through a newly establish consumer lending bank be more fruitful in relieving the credit crisis than giving money to failed banks, at no interest, so the banks can begin loaning money back to the public at an interest rate of their choosing? Moreover, should the banks receiving public funds through TARP be allowed to charge interest on the loans given to the public?
7. Explain where the trillions of dollars of money went which was made each and every year on financial instruments. How could that money have simply vanished, causing a credit crisis which required interest-free public money to correct?
8. Address why, If Larry Summers helped cause this crisis, why is he still on the Obama team?
9. Have any of the sellers of bundled mortgages, derivatives, CDS’s, or other financial instruments committed consumer or banking fraud according to existing laws?
10. Is it possible that a group of financial extremists within the financial industry didn’t intentionally create this crisis so they could profit when the market was going up (i.e. selling derivatives and CDS’s) and then make even more money when the market was in decline?
11. Did the Federal Reserve have any role, specifically through the promotion of banking deregulation, in causing the current crisis?
12. To what extent did Standard & Poors, Moody’s, and other rating agencies engage in fraud and/or other corrupt practices by issuing extremely high ratings (AAA) to extremely risky derivatives and other financial instruments?
13. Restrict the practice of selling hedge funds, short selling, and options trading.
14. Investigate employees of banks receiving TARP funds who were recipients of bonuses.
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