Political Quotes

“Proprietary trading brings high amounts of risk directly into the financial infrastructure and has repeatedly and severely damaged the financial system. It was a large part of the banking collapse of 1929, which is why Glass-Steagall restrictions separating investment banks from commercial banks were enacted. In 1998, as Glass-Steagall was being weakened, proprietary trading in complex derivatives left the major Wall Street banks facing billions in losses. The Federal Reserve organized the first massive bailout of a too big to fail nonbank, Long-Term Capital Management. And in our current crisis, proprietary trading in subprime securities and derivatives was the critical factor in the failure of major Wall Street firms in 2008. By April 2008, the Nation's largest financial firms had suffered $230 billion in losses based on their proprietary trading. And by the end of 2008, the taxpayers were forced to put up hundreds of billions of dollars in TARP funds to avoid the collapse of our economy. Lehman Brothers is one example. In 1998, it had 'only' $28 billion in proprietary holdings. By 2007, its proprietary holdings had soared to $313 billion. When the values of these holdings declined in 2007 and 2008, Lehman Brothers lost $32 billion, its losses exceeded its net worth, and by September 2008, the firm had collapsed in the largest bankruptcy in history.”