John Paladin Law Office
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Financial reform, Wall Street

"Inside Job", a 2010 documentary about the financial crisis by Charles Ferguson:


8/21/13. The Confidential Memo at the Heart of the Global Financial Crisis:


5/3/13. Federal Reserve Governor on "too big to fail" banks:


2/28/13. Break up the biggest banks. End "too big to fail" in the banking industry. End government support and protection for wrongdoing by the largest financial institutions.


Banking Is a Criminal Industry Because Its Crimes Go Unpunished.
By Charles Ferguson



8/27/13. Federal Reserve review, 1987-2013:


9/15/13. On fifth anniversary of financial crisis Paulson urges bipartisan deals to spur growth:


November 27, 2011 article about extent of financial crisis. Note the part that says $1.2 TRILLION dollars in bail out money paid (loaned?) to banks and to financial institutions in one single day, 12/5/08.

10/24/13. Federal Reserve Toughens Requirements For Biggest Banks. Article mentions over $1 trillion in emergency loans made by Fed in one day in December, 2008:


Derivatives regulation:


July 15, 2010. A deeper shade of blue:

ActBlue — The online clearinghouse for Democratic action.

To understand why ActBlue is so important, just look at the financial reform bill. According to POLITICO, Wall Street moguls are hopping mad about the Democrats success in curbing the their reckless behavior. One financial executive implied that the Democrats were shameless for trying to fundraise from the business community, and a banker called those efforts "unseemly at best."

In short, because Democrats are trying to solve the problems facing our country, bankers and financial executives have cut them off. Democrats are in a bind -they need money to run successful campaigns, but the banking industry prefers its bosom buddies in the Republican Party.

That's where ActBlue comes in.

The contributions that ActBlue sends to Democrats come from individuals as diverse as our country, the kind of folks who don't get seven-figure bonuses. ActBlue has sent $140 million to Democrats, and the average donation size is only $130. In other words, ActBlue allows ordinary Americans to play politics with Wall Street wallets. That means a louder voice for the American people in our nation's capitol, and leaders who are free to address American problems rather than corporate ones.

At ActBlue, we fund our work with
$15 recurring contributions from our users. If you value a politics that is more about solving big problems than soothing big egos, then please:

Support ActBlue.

From all of us at ActBlue, thanks.

Erin Hill
Executive Director, ActBlue

P.S. At ActBlue, we've been fighting for Democrats for half a decade. Support the future of Democratic politics with a
$15 recurring contribution. You can also link your ActBlue account with Twitter and donate via tweet!


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July 15, 2010.
WASHINGTON — Congress on Thursday passed the stiffest restrictions on banks and Wall Street since the Great Depression, clamping down on lending practices and expanding consumer protections to prevent a repeat of the 2008 meltdown that knocked the economy to its knees.

A year in the making and 22 months after the collapse of Lehman Brothers triggered a worldwide panic in credit and other markets, the bill cleared its final hurdle with a 60-39 Senate vote (very close to a party line vote) and goes to the White House for President Barack Obama's signature.

The law will give the government new powers to break up companies that threaten the economy, create a new agency to guard consumers in their financial transactions and shine a light into shadow financial markets that escaped the oversight of regulators.


May 20, 2010
WASHINGTON ( - The Senate passed late Thursday night the most sweeping regulatory overhaul of the financial system since the New Deal.

The bill, which passed 59-39, imposes more oversight and stronger capital cushions for the largest banks and Wall Street firms, while aiming to stop bailouts, shine a light on complex financial products and strengthen consumer protection.

The bill only needed 51 votes to pass. Earlier in the evening, the bill cleared a tougher hurdle, a 60 vote threshold, ending a filibuster against stopping debate....


April 17, 2010
An opinion about the need for financial reform in the United States

A brief overview of the world financial meltdown of 2008 and its aftermath. Thanks to and for their reporting on these issues.

Collateral Debt Obligations, or CDO’s, are mysterious sounding things which played a part in the world and United States financial crisis which became noticeable in 2008 before our presidential election. Banking deregulation is and was at the heart of that problem, and reforms are needed to prevent it from happening again.

People like to say that Wall Street and those financial instruments are so complicated, they are hard to regulate. Guess what: Yes they are complicated. The need for regulation is not that hard to understand when you look at the financial wreckage of what happened. What happened was the equivalent of large scale robbery against the American public, committed by giant banks, hedge funds and Wall Street firms, and it should not be allowed to happen again.

Putting aside for a moment the stock market crash of 1929, in the “old days,” depending on how you measure it, banks probably could not easily create new stocks or securities and sell them to the public. I am going to guess that changed with banking deregulation in the late 20th Century.

In the lead up to the financial crisis of 2008, many of the most financially damaging things that happened probably were not illegal. They would probably be difficult to prosecute criminally because of weak banking laws. We aren’t hearing about significant criminal cases happening, and that probably is not going to happen. What society should realize is that a lot of what happened should be illegal or made the subject of federal laws, so we as society don’t get robbed again by big banks, hedge funds and Wall Street executives, which seems to have happened under the current system.

At the core of those financial abuses are the facts that banks were making bad or subprime housing loans to people who could not or who would not pay back the loans. Banks were looking for the fees they got by making those loans. Bank executives had the incentive to do those things on a large scale in order to boost the bottom line and to get bigger paychecks and bonuses for themselves. If they did well they made money. If the investments became worthless, the problem became someone else’s problem; very few if any top bank executives, hedge fund managers or Wall Street executives lost their jobs because of what happened. The American taxpayers paid for much of the damages. Read on to understand how to not let that happen again.

Idea 1:
If there is a size limit to banks through federal laws (not just regulations which could be overruled by a regulatory department), there is less chance that the formerly big banks can create a big financial risk to society. Hedge funds will be less able to manipulate the system to their advantage if the banks are limited to a smaller capital size. Credit for this idea: The first place I recently saw and heard this idea explained was at

If a bank is huge, which several are, with assets in the amount of several hundreds of billions or more, even trillions, that does not help the average customer or small business get a loan. There is no great benefit to society from the existence of such large banks. However, the risks to society are great from that situation. Banks that are too big are on the lookout for ways to increase their fees and commissions, which led to the recent financial meltdown through collateralized debt obligations, or CDO’s.

How did collateralized debt obligations help the average American consumer or small business? They didn’t. They were a way for the giant banks, acting with hedge funds and Wall Street executives, to rack up huge fees and commissions at the expense of the American taxpayer. When that system collapsed because of plummeting asset values, we heard the argument in Washington that the banks were too big to fail; bail us out. And we did. There went hundreds of billions of dollars of American taxpayer money to big banks, big insurance companies (such as AIG) and Wall Street firms. No questions asked about what they would do with the money.

Why did the banks and firms have to be bailed out? Here is a theory which is part of the mystery of the CDO’s. The people involved in the financial wrongdoing want their conduct to remain a mystery in order to cover up their wrongful conduct, and so the average American voter and taxpayer doesn’t rise up and say enough of this nonsense. We want financial reform so this doesn’t happen again.

Filling in the blanks in this mystery of the bailout money goes like this: If people who bought the CDO’s lost their money because the investments became worthless, that could have been the end of the story, or at least the end of a chapter without a taxpayer bailout at the end. But it wasn’t the end. We know that insurance giant AIG insured some of the worthless securities. AIG had to pay people or investors for their worthless investments which were insured by AIG. What must have happened in other ways which were not made public is that big banks and Wall Street firms either still owned some CDO’s which lost a lot of value, or they had to give back money to investors who bought their products which became worthless.

The big banks and Wall Street firms were faced with collapse because they could not afford to stay in business if their investments were either worthless, or if they had to reimburse customers who lost a lot of money in the collapse of the market. So those big banks and Wall Street firms said to Washington: Bail us out; pay for our losses so we can stay in business. If you don’t, we will be forced to go out of business and the economy can’t handle the consequences of having us go out of business.

One thing that the banks and Wall Street firms said at that time was probably true: the American financial system would have been much worse off if those institutions had gone out of business. Even though the average customer and small business was not involved in CDO’s, if those big financial institutions went out of business, it would have put a huge crimp in the day to day living of the average person or average small business (example: your local bank isn’t there any more; it would have been a real problem).

Which takes us back to idea number 1 above: There should be a size limit on banks. Add to that, banks should not be allowed to create and/or sell securities or stocks.

Idea 2:
Banks should not be allowed to create or sell any security or stock. Sale of bonds by banks, if any, should be strictly regulated as outlined further below.

Oh how nice. I can go in my local bank and buy a share of stock for junior’s college fund. How about buying a collateral debt obligation instead? No. Banks should not be allowed to deal in stock brokerage activities.

What the banks really wanted to do was to gather up all of those subprime loans as new securities or stocks, and sell them to unsuspecting investors. Which is what they did. Banks and Wall Street firms made money on fees and commissions in the act of selling those securitized debts, or mortgages packaged as securities. The banks and Wall Street firms were motivated to get more fees to fuel their profit statements, which would allow executives to get bigger paychecks and bonuses.

As long as things went well, they made more money. And when things didn’t go well, guess what, they still made money. Remember: We are too big to fail. Bail us out. And the American taxpayers did just that, no questions asked about where all that early bailout money was going (TARP funds; Troubled Asset Relief Program).

That is still not the whole story. There was more money to be made on the collapse of the CDO market by hedge funds, again aided by Wall Street firms.

Executives at big banks and Wall Street firms made money on loan fees and commissions by making subprime loans, packaging them into securities and selling them to investors. How do you make even more money on this situation during the collapse of the market? By shorting the market in CDO’s.

How do you short the market? You don’t just go outside your front door and say you are going to short the market. You have to know the people who make the market. Making the market means to literally make the place where a financial product is bought and sold. That would be done by: big banks and Wall Street firms, in collusion with hedge funds. It would be like their private stock market.

Shorting the market is a fiction of the financial system in which you seek to make money on an asset when the value of that asset goes down. In order to do that you have to have a contract with the market maker. Who would be a market maker to short a CDO? The average person or small business would not have anything to do with that process. Shorting a market on that scale, involving probably hundreds of billions of dollars, would take companies with large amounts of assets in order to set up the contracts. Enter: big banks, hedge funds, Wall Street firms.

The following is based on assumptions about how to short the market on CDO’s:
Hedge funds sensed the chance to make money on the collapse of the CDO market, so they set up a system with the creators of those assets, using the services of Wall Street investment banks. The contract would say that the hedge fund puts in a substantial down payment as collateral in a short sale contract. In effect the investor at that point sells what he does not own: borrowed CDO’s from the books of whoever held the instruments.

You are selling what you don’t own; it is borrowed from a middleman. If the value of that asset goes down, which it did, you then cover or cancel your short position at or near the bottom of the market. The difference between the high point where you sold short and the bottom point where you closed your contract is your profit. That is what the hedge funds must have done to make money on the down side of the market. The process would not be available to the average customer or investor. You would have had to know the insiders at the big banks and Wall Street investment firms who had the ability to set up such contracts.

At the bottom of the market, the original buyer of the CDO had lost a lot of money on the down side. That was to be reimbursed by American taxpayers in the financial bailout. The icing on the cake is that the same banks that created the short sale market then owed the hedge funds their profit on the down side, measured in the short sale as the difference between the high point of the market and the low point when the short contracts were closed out. Those further losses to the banks were profits to the hedge fund operators, and were probably also paid for by American taxpayers from TARP money.

That’s why you hear so little explanation, almost no explanation, about where the TARP money went. It went everywhere and nowhere: The original CDO buyers probably got paid back, and the short sellers got paid their profits under the short sale contracts. It was a lose-lose situation for taxpayers. What is the reason for the big banks and Wall Street firms to engage in that type of insane behavior? They are making money every step of the way on fees and commissions for each transaction, and big salaries and big bonuses for high level executives. The market goes up, they make money; the market goes down, they still make money.

There is a limit to the free market economy, and we have just seen it. Just as your right to swing your fist ends where my nose begins, there is a limit to the unbridled creation, buying and selling of idiotic financial instruments at the expense of the taxpayer. There is no benefit to the average American taxpayer and voter from allowing banks to be over a certain size limit. There can be a greater number of limited size banks, and the needs of the average banking customer and small business will be met.

Banks should not be allowed to create or to sell stocks or securities. If a bank is allowed to sell bonds, they should not be allowed to sell any bond or financial instrument which the bank had a hand in creating (with a limited exception for raising its own operating capital); that process needs to be closely regulated for full disclosures of risks to investors.

People in congress who are opposed to new financial regulations on banks say that taxpayers should not have to bail out banks, and that banks should be allowed to fail. That is about half of a correct statement. Banks and financial institutions should not be allowed to engage in such risky behavior in the first place. They should not be allowed to create or to sell securities; they should not be allowed to make the market in the sale or short sale of securities. Hint: people in Congress who are against financial reform of banks often times have received substantial campaign contributions from those banks and financial institutions which are opposed to regulations and reforms. The U.S. Supreme Court recently ruled in Citizens United v. Federal Election Commission that corporations have free speech rights in elections. Those downtrodden financial institutions need their supporters.

If the size of banks is limited, and there are more of them, and their conduct is limited by federal law, then if a bank has to fail for some reason, it can fail. The American taxpayer will not have to bail it out beyond normal FDIC insurance limits. A bank failure in those circumstances would not have a major negative effect on the overall economy.

The American banking system and the oversized banks as they now exist need to be regulated by new federal laws. It is called financial reform. The time is now so it does not happen again. And one more thing: the filibuster in the United States Senate should be abolished because it has created a dysfunctional way of doing business there.

John Paladin, Esq.


4/28/10. Republican Senators who filibustered against financial reform and then caved in are pansies. That's the best way to describe their behavior since they filibustered for three days during regular business hours and then cancelled the filibuster when they were faced with an all night session. How devoted could they be to their friends at the banks and on Wall Street? ;-)



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