Brooksley Born, who headed the Commodity Futures Trading Commission (CFTC).
Village Voice Article
Do you get what actually happened? This is what I understand went
down: banks and other financial institutions conspired to set up these
huge funds-- derivatives-- which consisted of bundled mortgages and loans
amounting to trillions of dollars. They resold these packages to
investors and then, to eliminate any risk, set up entities to back the
loans called "credit swaps". The credit swaps guaranteed repayment of
the loans if the borrowers defaulted, essentially giving investors all the
benefits of risk -- high payments-- with none of the actual risks.
These credit swaps were fraudulently presented as some kind of magical black
box which could never fail to produce bunnies, when, in fact, they were
never responsibly vetted by any authority. It was the duty of the
government to vet these instruments-- it failed.
These funds spread like
wildfire throughout the financial industry until nobody even knew who was
really
holding what. When the mortgage bubble burst and housing prices began
falling catastrophically in the U.S., buyers started defaulting on
their loans in massive numbers, bleeding the magical system dry, and sucking
up all of the liquidity in the entire financial system.
That's my understanding as far as it goes.
February 12, 2009
Another Hero
The most frightening thing about the bail-out is the number of people, like
Robert Rubin and Henry Paulson, who were involved in the original sin who
are now involved in the massive attempted "redemption" of the world economy.
Can the same people who steered us into the ice berg rescue the
passengers from the life boats?
Much as I would like to lay this at Bush's feet, it is clear that the era
of deregulation began under Clinton and that Bush merely carried on in the
same general spirit.
Even after reading a lot of
articles on the current economic crisis, it is difficult to get a
grasp on just what, specifically, brought about the chain of events that
have led to our current upheaval. The question is, who is responsible,
and why.
Well, we know of someone who was not
responsible. I'll bet you've never heard of her. Her name is
Brooksley Born. During the Clinton administration, she was in charge of
the Commodity Futures Trading Commission. She objected to these new
derivatives and credit swaps and other nefarious instruments of economic
bamboozlement. But she was overruled and marginalized by Alan Greenspan
and Robert Rubin, who were entranced and delighted with the possibilities
raised by deregulation of the
securities markets. (Rubin was later a director and counselor to CitiBank,
until January this year, when he went to work for Obama). They saw lots of Enrons (then considered
miraculously profitable) splashing money
around making all their friends rich. Well, to be generous, they
probably would like you to believe they thought any red-blooded American
investor could get rich by investing in a company like Enron.
Today, everybody knows about Kenneth Lay and AIG and
Eliot Spitzer and Britney Spears and even Susan Boyle, and nobody knows the name Brooksley Born. So
here is my modest little tribute to a great woman:
Brooksley, you were
right.
You were wise when everyone around embraced foolishness. Someone should name a large federal building for you.
And remove the name "Greenspan".
The
world of high finance and banking seems to have been mainly a giant ponzi scheme and those who
were in on the
backroom deals profited immensely and, so far, with near impunity.
No one will ever know exactly how complicit Rubin
and Greenspan and the others were, but
we do know that neither of them left their federal appointments to go work
for Habitat for Humanity.
Do Americans
finally get what's going on? While they were all excited about this
incredibly expensive military adventure in Iraq that would cost nearly a
trillion dollars-- to prevent America's interests from being harmed by
nefarious Islamic foes-- American's interests were harmed by the same fat
cats that sponsored Bush in the first place, the ones who got all the tax
cuts, the ones who urged you to keep America safe by voting for a strong
military.
They are counting on your
ignorance, your indifference, your confusion. They are counting on you
believing that our economic systems is fundamentally sound and fundamentally
serves your interests in spit of what appears to be looting on an
unimaginable scale, of your pensions, your insurance, your mortgages.
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© Bill Van Dyk
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