From "All The Devils Are Here" by Bethany McLean and Joe Nocer - In many states it was against the law for pension funds to purchase private mortgage backed securities. They had “blue sky laws” designed to prevent investment fraud, meaning that Wall Street firms had to register with each of the fifty states to sell mortgage-backed deals, a process they had to repeat on every single deal. JP Morgan CEO Weatherstone’s first act when he became CEO in 1990 was to persuade the Federal Reserve to allow the bank to begin trading securities in the United States. This was a huge shift in U.S. policy; ever since the Great Depression, the government had kept commercial banking and investment banking apart. (Glass-Steagall, the 1933 law that mandated this change, forced JP Morgan to spin off its investment banking arm, which was rechristened Morgan Stainley). -
Posted on: Sat, 20 Jul 2013 16:24:58 +0000