Across the board, the Bush Administration aggressively deregulated financial markets. At the OTS this strategy was spearheaded by James Gilleran who headed the agency from 2001-2005. In his first 3 years, he cut OTS’s 1,200 staff by a quarter even as the value of the assets the agency oversaw increased by half. Banks were also allowed to draw down their reserves on average by a third to the lowest level in 20 years. To justify this, the OTS accepted unrealistic projections on what expected losses in the banks’ loan portfolios would be. At the time thrifts were making more and more higher risk adjustable rate mortgages (ARMs), the OTS permitted them to assess the risk of these in terms of their introductory low rate and not the higher rate to which the loans would ultimately convert. And no, these loans were not being to the poor. As part of Gilleran’s deregulation, government obligations to lend in low income communities were not strictly enforced.

The structure of the OTS was also at odds with its mission. It had an inherent and fatal conflict of interest. It was funded by the very banks it was tasked with regulating. The bigger the bank the bigger the contribution. So although the OTS oversaw some 750 banks, Washington Mutual (WaMu) alone paid 13% of its budget. The mortgage writer Countrywide which was actually recruited by the OTS to become a thrift on the promise that it would be loosely regulated accounted for another 5% of the OTS budget.

In short, the thrifts were paying the OTS not to regulate them, and in exchange for the budget it received from them the OTS turned a blind eye to their reckless behavior. This arrangement worked out very well until the thrifts crashed and burned. Who could have predicted . . .?

In response to the WSJ article, the authors of the whistleblower protection clause of SOX, Senators Patrick Leahy (D-VT) and Chuck Grassley (R-IA), wrote a letter dated September 9, 2008 to Secretary Chao pointing out that both the language of the statute and their intention were clearly for subsidiaries to be covered under the whistleblower protection and that “there is simply no basis” for the Labor Department’s interpretation. They demanded an explanation of the Department’s actions.

But it is clear what Bush’s Labor Department and its Secretary Elaine Chao were doing. They were running interference for corporate malefactors and hanging out to dry those who would expose their wrongdoing, in other words business as usual.

The reasons are obvious: infrastructure (in transportation, we are talking about highways, airports, seaports, railroads and pipelines, primarily) as an asset class, particularly in the U.S., offers very stable long-run returns at medium risk.

The idea is if you want to play (or drive), you have to pay.

USDOT is increasingly attracted to the potential benefits offered by the growing move to a direct user fee model in which a willing private sector can bear large amounts of financing and system management risk.

To this end, he has written model laws for states to create private toll roads and got Congress to approve $15 billion in tax exempt bonds for them.

Duvall is another Bush free market ideologue with no background in transportation. He got his first job at Transportation in 2002 as he describes it as “It was a friend of a friend of a friend sort of thing.” He has been aided by the Department’s General Counsel D.J. Gribbin who got his job through his father’s connections to Dick Cheney and Halliburton and his own to Ralph Reed’s Christian Coalition. A GAO study reported that private toll roads charge more than their public counterparts because they have to generate profits for investors. The nation’s infrastructure should be something more than an “asset class.” This is what happened to crude oil and we saw how well that turned out.