by Martha Rhodes

Created on: October 28, 2008

Over and over again we've heard some variation of the old adage "so goes the financials, so goes the market" and the financials were obviously going down but how many, how far and who will go with them are all questions left unanswered. Did investors get too greedy? Did short sellers undermine the fundamentals of perfectly good investments? Did media professionals fail to investigate and report problems with the business models of these very lucrative businesses or was that failure self-preservation?

To answer the question of whether money from campaign contributions and lobbying could have contributed to the meltdown on Wall Street, you need only decide if politics affects Wall Street. If you think "yes," then the life of former lobbyist, Jack Abramoff supports the notion that no one is above suspicion when it comes to large amounts of cash or the always coveted box seats. In 2006, Abramoff pled guilty to various counts of corruption involving members of Congress and in September 2008 it was reported that he may be facing more time behind bars.1

The financial sector is the biggest source of campaign contributions to political candidates. Lobbyists are usually former elected politicians who are approached by special interests while they are in office. They are offered very lucrative contracts based on their knowledge and potential influence on those that still hold office. Because politicians were so honest before 2006, it was not until the passing of the Honest Leadership and Open Government Act of 2007 that lobbyists were required to file reports detailing their campaign contributions to lawmakers.

The Wall Street meltdown is partially blamed on the sub-prime housing "bubble." Even the complicated formulas for determining the valuations of housing have been called into question as a source for some blame. Since it is the role of government to provide safeguards and oversight of financial institutions, the buck still stops in Washington.

After the 1929 stock market crash, there were two important pieces of banking legislation that consumers relied on to keep their deposits safe and to provide nondiscriminatory credit opportunities. The Glass-Steagall Act (GSA) established a regulatory "firewall" between the commercial and investment banking institutions and the Community Reinvestment Act of 1977 (CRA) required banks to provide services for lower-income customers in their service areas. In essence, the GSA protected consumers by limiting underwriting activities

• 1
• 2
• Next Page >>