13 Bankers: The Wall Street Takeover and the Next Financial Meltdown — CHAPTER 5: THE BEST DEAL EVER

1. 1. The SEC's 2004 rule change allowed investment banks to use internal risk models to set net capital requirements, enabling them to pile on debt.
2. 2. The Commodity Futures Modernization Act of 2000 exempted over-the-counter derivatives from regulation, including credit default swaps.
3. 3. Rating agencies like Moody's and S&P gave AAA ratings to subprime mortgage-backed securities and CDOs, despite their high risk.
4. 4. The Federal Reserve under Greenspan refused to crack down on predatory lending, despite warnings from Governor Gramlich.
5. 5. The Office of the Comptroller of the Currency preempted state anti-predatory lending laws, blocking states from protecting borrowers.
6. 6. Fannie Mae and Freddie Mac were not the primary cause of the crisis; private-label subprime securitization far exceeded their involvement.
7. 7. The repeal of the Glass-Steagall Act and the 1996 Fed decision allowing banks to expand derivatives activities increased systemic risk.
8. 8. Banks used off-balance-sheet entities like structured investment vehicles (SIVs) to hide risk and circumvent capital requirements.