Besides being able to write swaps or insurance on crap loans, the repeal of Glass-Steagall allowed MBS securitization of mortgages. Here is the Kentucky Court transcript explaining this diabolical plan. Don't anyone ever tell me this was not a massive and predetermined determined plan:
75. From the time of the Great Depression
up and until 1999, the
conversion of loans into MBS was illegal. The Banking Act of 1933
established the Federal Deposit Insurance Corporation (FDIC)
United States and introduced banking reforms, some of which were designed
to control speculation of the exact nature of what has taken place in the
last several years. It was commonly known as the Glass– Steagall Act
Over the years provisions of the Act were eroded little by little, until
the Act was finally killed with the last repeal of the section which
prohibited a bank holding company
from owning other financial companies.
This was accomplished with the Gramm–Leach Act.
This Gramm-Leach-Bliley repeal which was really an act of treasonous attack on mainstreet, brought securitization to our shores. And Basel 3, as I have written about until I am blue in the face here, wants government guarantees of these mortgages permanent, and take out of the hands of congress the ability to stop the guarantees if economically necessary. This introduces moral hazard and the desire on the part of government/Wall Street to continue to blow bubbles that are totally unsustainable. Archive Link