by Rayne Britt

Created on: October 30, 2008

I don't believe lobbyists are the reason for this particular problem. I have seen a lot of good ideas and insights into the reasons for the economic break down we have seen in these recent days. However, so far no one has hit the nail on the head, though some people have been swinging close and hard.

It is partly the fault of both Republicans and Democrats and cannot be blamed solely on any one person or group. The real reason for the "Wall Street Meltdown" is the repealing of two crucial economic policies began during the depression to prevent this and similar collapses from happening and to reverse the economic crisis of the day. They are the Glass Steagall Act and the Uptick Rule.

The Glass Steagall Act of 1933 began the FDIC in the United States as well as including banking reforms. Provisions that prohibit bank holding companies from owning other financial companies were repealed on November 12, 1999, by the Gramm-Leach-Bliley Act. The New York Times predicted an enonomic downfall might occur in an article about Fannie Mae and the repealing of the law dated September 30, 1999 stating, "In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's." We saw this coming and instead of doing something about it we made the problem worse by ending the second economic policy which could have prevented this from happening, the Uptick Rule.

The Uptick Rule was adopted by the Securities and Exchange Commission (SEC) in 1938. The Uptick Rule prevented companies from crashing due to large scale shorting of company stock. A company's stock could not be sold short as long as it was in continuous decline. Short sellers had to wait for an uptick in the stock before shorting. The Uptick Rule was eliminated in July 2007.

There have been attempts to get the Uptick Rule Reinstated to reverse the damages done by eliminating it. Trader's Magazine reported on October 7th, 2008 that Erik Sirri, director of the Securities and Exchange Commission's Division of Trading and Markets stated at an Investment Company Institute conference in New York, "We've (the SEC) [had] a lot of calls to bring it back. It's something we have talked about and it may be something that we in fact do."

Lobbyists were not the problem then and they aren't now. The problem was poor decision making by our elected officials past and present who did not have enough foresight to see this coming even though others did see it coming and said as much and poor planning by the corporations and bodies overseeing them. Putting these things back into effect or starting similar practices to these two would put the economy back on track and prevent this from happening again without asking taxpayers to foot the ($700 Billion) bill.

Sources:

http://query.nytimes.com/gst/fullpage.h tml?res=9C0DE7DB153EF933A0575AC0A96F958260&sec=&spon=&partner=permalink&exprod=permalink

http://en.wikipedia.org/wiki/Glass_s teagall

http://en.wikipedia.org/wiki/Uptick_rule

http: //www.tradersmagazine.com/news/102225-1.html

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