Watching Frontline on Derivatives

[AllentownJake]

The blame on part of our current economic problems lay on three people's heads

1) Robert Rubin
2) Alan Greenspan
3) Larry Summers

Regulation was proposed in the 1990s and these three did everything they could to undermine those regulations. Brooksly Born was a hero, tried to go against powerful forces, and these evil men thwarted her.

Even after the meltdown of Long Term Capital Management. These three men blocked things. One of these evil men, currently has a position in the White House.

[ProSense]

1. Obama is going to

get it done

[girl gone mad]

5. That may be wishful thinking.

98% of Banks Exempt From New Oversight Regulations
http://www.nytimes.com/2009/10/16/business/16regulate.html

Bowing to political pressure from community bankers, the House Financial Services Committee approved an exemption on Thursday for more than 98 percent of the nation’s banks from oversight by a new agency created to protect consumers from abusive or deceptive credit cards, mortgages and other loans.

The carve-out in legislation overhauling the regulatory system would prevent the new consumer financial protection agency from conducting annual examinations of the lending practices at more than 8,000 of the nation’s 8,200 banks, leaving only the largest banks and other lenders subject to the agency’s examiners.

Earlier in the day, the committee completed its work on a different contentious provision of the legislation when, on a nearly straight party-line vote of 43 to 26, it approved tougher regulations over the derivatives market. That provision, too, contained exemptions for many businesses.

Under the Miller-Moore amendment, the new agency would have the authority to write rules for all banks and other lenders, including lenders that have never faced significant regulation. But the banks with assets of less than $10 billion and credit unions smaller than $1.5 billion would not face regular exams by the agency.

While the administration quickly embraced the derivatives legislation, a top regulator appointed by President Obama indicated that compromises made to win the support of moderate Democrats led to problematic loopholes. The regulator, Gary G. Gensler, chairman of the Commodity Futures Trading Commission, vowed to try to strengthen the measure when it is considered by a second House committee next week.

[ProSense]

7. What? Most banks aren't even relevant in the big picture. Besides

Big financial firms losing power on Capitol Hill

[AllentownJake]

9. You do run the risk of the dervivatives market

leaving the big banks and going to smaller firms. It will be a state regulator issue. You could run the risk of one of the Dakotas blowing up the economy.

However, taking out the big boys is a start.

[omega minimo]

2. Under Clinton's watch?

When REregulation didn't take and NAFTA, GATT and Telecomm '96 GUTTED the commonwealth and media of the nation and the nation's future (i.e. now)?

When the fucking hypocrites "ended welfare as we know it" while selling out to corporate AmerKKKa?

:evilfrown:

[AllentownJake]

4. Yep

Bill Clinton was a bad President for long term growth of the nation in hindsite.

[omega minimo]

10. NO not in HINDSIGHT! In common sense, 20/20 REAL TIME.

:kick:

[girl gone mad]

3. And another is an Obama adviser.

The very definition of 'failing up'.

[Psephos]

6. The unregulated derivative bubble is the root cause of our current woes.

In conjunction with lax oversight and perverse incentives from Fannie and Freddie, derivatives fueled the housing bubble by letting banks and financial houses take wild risks, believing their credit swaps would shield them from any unforeseen market swings.

Credit swaps and similar derivatives are the most toxic of the toxic assets we've heard so much about, because there's nothing behind them except the "faith and credit" of firms that are no longer faithful or creditable.

Brooksley Born, as head of the Commodity Futures Trading Commission, was sounding the alarms starting in 1996, and eventually resigned in 1998 after her reforms of flaccid oversight of un-transparent derivative deals were stonewalled. During her tenure, she withstood immense condemnation and suppression from government officials and financial leaders alike as she tried to bring unregulated derivatives under Federal oversight.

Here's a good write-up about her.

http://www.washingtonpost.com/wp-dyn/content/article/2009/05/25/AR2009052502108.html

[bridgit]

8. Handmaidens to avarice all. Niall Ferguson has pointed to some interesting characters too...

http://www.pbs.org/wnet/ascentofmoney

[Phoebe Loosinhouse]

11. What's sauce for the goose is sauce for the gander.

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=6816983&mesg_id=6816983

Why not?

[Democrats_win]

12. In Michael Moore's movie, "Capitalism...," he shows a cover of Time with these 3 on the cover.

Now their pictures belong in a postoffice.

[Warpy]

13. I'm getting angrier and angrier

because they knew when LTCM failed that derivatives were dangerous and could take the whole planet's financial system down, they still did nothing, thanks to all the crap coming out of Greenspan and to a lesser extent Rubin and Summers.

Greenspan wants his balls roasted, really. He was such a rigid dogmatist that reality simply never entered his closed mind. He was the worst sort of true believer, put into the one position in the world where he could do the most damage.

In short, the man was a blind fool.

I hope this program is only the first and that he is disgraced and hounded for the rest of his rotten life which will be too mercifully short and not nearly public enough.

[buzzard]

14. An interesting look back in time.

snip from
http://www.federalreserve.gov/BOARDDOCS/TESTIMONY/1998/19980724.htm
Testimony of Chairman Alan Greenspan
The regulation of OTC derivatives
Before the Committee on Banking and Financial Services, U.S. House of Representatives
July 24, 1998

"I do not mean to suggest that counterparties will not in the future suffer significant losses on their OTC derivatives transactions. Since 1994 the effectiveness of their risk management skills has not been tested by widespread major declines in underlying asset prices. I have no doubt derivatives losses will mushroom at the next significant downturn as will losses on holdings of other risk assets, both on and off exchange. Nonetheless, I see no reason to question the underlying stability of the OTC markets, or the overall effectiveness of private market discipline, or the prudential supervision of the derivatives activities of banks and other regulated participants. The huge increase in the volume of OTC transactions reflects the judgments of counterparties that these instruments provide extensive protection against undue asset concentration risk. They are clearly perceived to add significant value to our financial structure, both here in the United States and internationally."

Maybe he thought he would be gone long before this happened.