A financial crash is waiting to happen
To the editor:
Dear Senator Warren, Senator Markey and Congressman Neal:
I have just finished a book, "The Big Short," by Michael Lewis, about the financial crash in 2008. The book describes how the bond market on Wall Street went out of control. It is very disturbing to know that what happened in 2008 is still happening today.
Wall Street banks are creating bonds that are based on loans, consumer credit and various other debts that are very bad risks. All of these bad risk debts are grouped together to create bonds. Then these bonds are grouped together to create more bonds. This process creates derivatives, and debt out of debt. This destroys capital, and therefore it is destroying this country. It is still going on, and if it continues, it will destroy the nation financially.
Between 2000 and 2008, these derivatives were based on sub-prime mortgages. These derivatives destroyed Wall Street investment banks and everything connected to them. If it is allowed to continue it will happen again.
The Wall Street bond market must be regulated by the US Treasury or the Federal Reserve Banking System, or some independent agency. Again, if it is not, this nation will be financially destroyed.
The six biggest Wall Street banks or institutions must be divided into smaller banks or institutions. Banks dealing with derivatives and speculative loans must be divided out and put into a bank classification that is different from normal banks that serve the public.
Our senators and congressman must stop these practices. If you do not, we are in very big financial trouble.
The investment bank industry must be regulated. Investment banks must be categorized as a speculative industry. Normal banks allocate capital and serve their customers. Investment banks/Wall Street do not. They speculate in bonds based on bad corporate credit and other bad credit risks. They have created trillions upon trillions of dollars of debt out of thin air. This must be stopped.
Read "The Big Short." It happened then and it is happening now.