Pax on both houses: Frontline: Brooksley Born Sees Pending Economic Calamity But Gets Slammed

Sunday, April 13, 2014

Frontline: Brooksley Born Sees Pending Economic Calamity But Gets Slammed

Alan: Here are the SOBs who let the 2008 collapse happen by gang "raping" whistleblower Brooksley Born, a smart, honest, moral woman who saw the collapse coming and announced its approach in no uncertain terms.

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Alan: American prosperity is episodic, animated by deliberately-induced boom/bust cycles. During "booms," the fictitious economy generates ungodly amounts of money most of it vacuumed by The 1%. During busts,"everyday Americans" get a red hot poker in "the dark place" while The 1% continue to make more money by "shorting the market" whose collapse they've devised.

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Heroes of banking reform. "These new rules represent a vindication for Ms. Bair, Mr. Hoenig and others who have played a leadership role on this topic, including Jeremiah Norton, a member of the board at the F.D.I.C. (see his statement this week). I'm a member of the independent and nonpartisan Systemic Risk Council, founded and led by Ms. Bair, and we have also written comment letters urging higher capital requirements. While this aspect of the broader debate on financial stability is not over, people who argue in favor of even stronger capital requirements are increasingly gaining the upper hand....The consensus among officials is shifting. Perhaps not enough and definitely not fast enough, but it is definitely moving in the right direction." Simon Johnson in The New York Times.

In The Warning -- http://www.pbs.org/wgbh/pages/frontline/warning/view/ -- veteran FRONTLINE producer Michael Kirk unearths the hidden history of the nation's worst financial crisis since the Great Depression. At the center of it all he finds Brooksley Born, who speaks for the first time on television about her failed campaign to regulate the secretive, multitrillion-dollar derivatives market whose crash helped trigger the financial collapse in the fall of 2008.

"I didn't know Brooksley Born," says former SEC Chairman Arthur Levitt, a member of President Clinton's powerful Working Group on Financial Markets. "I was told that she was irascible, difficult, stubborn, unreasonable." Levitt explains how the other principals of the Working Group -- former Fed Chairman Alan Greenspan and former Treasury Secretary Robert Rubin -- convinced him that Born's attempt to regulate the risky derivatives market could lead to financial turmoil, a conclusion he now believes was "clearly a mistake."

Born's battle behind closed doors was epic, Kirk finds. The members of the President's Working Group vehemently opposed regulation -- especially when proposed by a Washington outsider like Born.

"I walk into Brooksley's office one day; the blood has drained from her face," says Michael Greenberger, a former top official at the CFTC who worked closely with Born. "She's hanging up the telephone; she says to me: 'That was [former Assistant Treasury Secretary] Larry Summers.

He says, "You're going to cause the worst financial crisis since the end of World War II."... [He says he has] 13 bankers in his office who informed him of this. Stop, right away. No more.'"

Greenspan, Rubin and Summers ultimately prevailed on Congress to stop Born and limit future regulation of derivatives. "Born faced a formidable struggle pushing for regulation at a time when the stock market was booming," Kirk says. "Alan Greenspan was the maestro, and both parties in Washington were united in a belief that the markets would take care of themselves."

Now, with many of the same men who shut down Born in key positions in the Obama administration, The Warning reveals the complicated politics that led to this crisis and what it may say about current attempts to prevent the next one.

"It'll happen again if we don't take the appropriate steps," Born warns. "There will be significant financial downturns and disasters attributed to this regulatory gap over and over until we learn from experience."

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A fine companion piece is Frontline's "Meltdown." http://www.pbs.org/wgbh/pages/frontline/meltdown/view/

The upshot of The Warning and The Meltdown?

The rich and powerful walk...

... right through the revolving door.

Meanwhile, the patsies - typically the people who got screwed by "the malefactors of great wealth" --- serve as scapegoats who receive the wrath that should have blasted Greenspan, Rubin and Summers.