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How Wall Street Looted Local Governments, and What We Can Do

Author Les Leopold (The Looting of America: How Wall Street’s Game of Fantasy Finance Destroyed Our Jobs, Pensions, and Prosperity—and What We Can Do About It) has the perfect analogy for collateralized debt obligations, the financial WMD that Wall Street inflicted on the rest of America: they bought insurance on somebody else’s house, and when it burned down they collected the money.

From Capitol News Connection:

WASHINGTON — Although Senate passage of the sweeping financial reform bill promises increased protection against the banking abuses that triggered our economic meltdown, it does little for the state and local government victims of that fiscal catastrophe, says the author of a leading book on the subject.

Les Leopold is the author of the 2009 book The Looting of America: How Wall Street’s Game of Fantasy Finance Destroyed Our Jobs, Pensions and Prosperity, and What We Can Do About It.

He’s also a leading advocate for the local governments across the country whose budgets were cratered by exotic derivative deals gone bad.  ( See CNC Special Report: Derivative Disaster Spreads to Local Governments )

The just-passed Senate bill includes measures to regulate the trading of derivatives through exchanges and requires banks to spin off their derivative divisions. But is that enough?

‘Long way to go’
“We have a long way to go,” Leopold said in an interview with Capitol News Connection. “They sold billions of dollars of this crap to pension funds and state and local governments.”

By “they,” Leopold is referring to Wall Street and its major banks, as well as some foreign institutions.

The author is a 1975 graduate of Princeton University’s Woodrow Wilson School of Public and International Affairs and co-founded two non-profit educational institutes. He remains heavily involved in issues related to the economy, environment and occupational safety and health.

The lack of regulation of derivatives over the past decade, Leopold said, has created “an entire financial set of leveraging and pyramid schemes and new securities. I don’t think you can view it any way other as looting.”

Read the whole article here.

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