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Stunned… again… and we’re not the only ones…(Deanne R. Upson)

We wrote on September 22, 2008 that we were stunned to learn that banking and financial market regulators were considering using taxpayer funds to finance the creation of a separate entity to hold "toxic" financial instruments. We thought this would be a dangerous suggestion that will not solve the problem.

We wrote on April 3rd : With the development of toxic (derivative and subprime lending) financial products, the relationship between investment banks and the economy has turned parasitic.

We wrote: "To protect the public and the markets, these newer derivative contracts should be extinguished. To put the fire out, put the fire out."

Apparently, we’re not the only ones who saw this coming, raised the alarm, and were ignored. In his Commentary in the New York Times on Sunday, September 28 Ben Stein notes similar concerns and the need to “annul” financial gambling run rampant by the financiers who peddle derivatives, including the impossible to value “credit-default swaps.” Stein notes, “These derivatives are “weapons of financial mass destruction,” in the prophetic words of Warren Buffett.” Stein questions, “Why is this [correction] causing so much anguish? It must be the side bets, the credit-default swap bets, multiplying the effect of the housing downturn many times over.”

Socially responsible investing principles require that the perspectives of high, low- and moderate-income people are taken into account. We noted that on Friday, September 26, House Financial Services Committee held a public hearing titled, “The Future of Financial Services: Exploring Solutions for the Market Crisis” on Wednesday, September 24th. At the hearing one member noted her worries concerning the adverse impact of the current situation on women and minority owned businesses. Mr. Paulson replied that he got her message but would work through the Treasury plan first.

Right. It may be that impacts on owners of minority and women owned businesses – let alone homeowners and small businesses – are of little concern, since these are not people that members of the Wall Street Buddy System know, and therefore come after the people and financial markets they do know.

We noted in our posting Wednesday October 1, SRI Provisions of the Bailout Bill, that SRI principles are included in Sec 103 Consideration (of social issues):
(1) Protect the interest of taxpayers
(2) Protect American jobs, savings, and retirement securities
(3) Keep their homes and to stabilize communities
(4) Providing financial assistance to financial institutions, including those serving low and moderate-income populations and other underserved communities.

SRI Principles are also considered in Sec. 107 Contracting (social issues):
The Secretary shall develop and implement standards and procedures to ensure the inclusion and utilization of minorities and women, and minority- and women-owned business, in that solicitation or contract, including contracts to asset managers, servicers, property managers, and other service providers or expert consultants.

We urge Secretary Paulson and Mr. Kashkari to heavily utilize SRI principles and MWBEs considerations in the implementation of the Bailout Plan. There needs to be a bottom up approach to augment the top-down approach. This, hopefully, will create a path to new prosperity.

Deanne R. Upson
Sustainability Advisor

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