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mises
Joined: 05 Nov 2007
Location: retired
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 Posted: Tue Dec 21, 2010 3:37 pm Post subject: Celebrating Ten Years of Derivatives Deregulation |
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http://blog.littlesis.org/2010/12/21/celebrating-ten-years-of-derivatives-deregulation/
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Today marks the tenth anniversary of President Clinton�s signing of the Commodity Futures Modernization Act (CFMA). At passage, the bill was said to establish �legal certainty� for derivatives. In other words, the bill assured bankers that they wouldn�t face any legal consequences in the United States when they manipulated, defrauded, and colluded their way to billions in profits using financial derivatives that no one understood.
The CFMA led to serious consequences for the rest of us, including the exacerbation of the housing bubble and the subsequent bank bailouts and foreclosure crisis; the California electricity crisis; periodic food and energy price spikes that have hit consumer pocketbooks hard; and, of course, the continued reign of an unaccountable shadow banking sector over the economy.
The legislation was a bipartisan effort, but Clinton Treasury Secretary Larry Summers � who will soon be leaving the Obama White House � deserves the bulk of the credit for its passage. Summers, along with Robert Rubin and Alan Greenspan, had prevailed over CFTC chair Brooksley Born two years earlier when she attempted to subject derivatives to regulatory oversight. Born was essentially forced out by Summers & co, who then went to work putting together the deregulatory gift basket that later became known as the CFMA. Summers worked Congress in the year preceding the bill�s passage, and testified in June 2000 that it was his �very great hope� that the bill should pass.
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As early as August 2000 � four months before the passage of the CFMA � Summers lieutenant Lee Sachs, who handled energy negotiations for Summers, indicated to Enron lobbyists that Treasury would support the Enron language, which appeared in the House bill (but not the Senate bill). Here is Enron lobbyist Chris Long describing the meeting to higher-ups in an email from the Enron archive:
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It helped that the Clinton Treasury was very cozy with Enron. Just four days before Congress passed the CFMA, Summers awarded Enron lobbyist Linda Robertson � formerly an assistant secretary in the Summers Treasury � Treasury�s highest honor, the Alexander Hamilton award. Summers had recommended Robertson, who now works at the Federal Reserve, for the lobbyist job at Enron. Enron CEO Ken Lay later offered Summers a seat on the board of Enron, as he had done with the previous Treasury Secretary, Robert Rubin, at the close of the Clinton administration; Summers turned it down in light of his appointment as president of Harvard. Summers had also famously assured Lay that �I�ll keep my eye on power deregulation and energy market infrastructure issues� shortly after becoming Treasury Secretary, in hand-written scrawl at the bottom of a letter.
Enron lobbyist Robertson later recommended Lee Sachs � who served in the Geithner Treasury from 2009 to 2010 � for a spot on Enron�s advisory committee in an email to Lay assistant Steve Kean and lobbyist Richard Shapiro. The email is worth printing in full (she also mentions the Summers board appointment at the beginning):
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Sachs went on to put his corrupt buffoonery talents to work for Perseus LLC (Mises: http://tinyurl.com/3ycg58d - look at the individuals and organizations making donations to Perseus's foundation), a private equity firm run by top Democratic insiders Jim Johnson, Richard Holbrooke, and Frank Pearl. He later joined the hedge fund Mariner Investment Group, where he sold toxic CDOs to investors. In 2009 he became Geithner�s right-hand man at Treasury, but left in March 2010 in the wake of controversy surrounding those CDOs, and landed on his feet at Brookings.
When he leaves the Obama administration, Summers will inevitably slip out the revolving door and land some lucrative consulting contracts with investment firms that he helped bail out. |
One big happy (crime) family. Back again.
The 990 tax form shows that neo-liberals and neo-conservatives are completely comfortable with each other.
So ten years later and the system blew up and there is fully zero indication that sensible rules will be put in place. The people who built the financial system that collapsed are in charge of it to this day. |
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Koveras
Joined: 09 Oct 2008
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| Posted: Wed Dec 22, 2010 7:58 am Post subject: |
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| People don't want to believe that deregulation was 'bipartisan', essentially unanimous. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Wed Dec 22, 2010 8:30 am Post subject: |
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| Koveras wrote: |
| People don't want to believe that deregulation was 'bipartisan', essentially unanimous. |
Not only was deregulation bipartisan, the crimes are bipartisan too. What's most frustrating is that the Enron catastrophe is essentially inseparable from the reining political-economic government/banking/hedge fund/academic establishment, and that establishment walked away without a bruise.
The Enron story has not been completely investigated and/or told at all. This is similar to Madoff. I've read a few books about Bernie and his scam was much larger than a ponzi scheme and he was absolutely no lone wolf. He had major institutional support from people in the know. When he was low on liquidity (as ponzi schemes are) major institutions and individuals stepped up with cash, with the understanding that they'd be paid back with looted funds. He was the chair of the NASDAQ!
Madoff was also involved in cleaning/investing money for the "Russian" mafia, which is why Markopolos slept with a shotgun. All the drug and arms money is invested with people like Madoff. It was only with the huge cash flow of organized crime that Madoff could keep the scam going. The separation between the existing elite on Wall Street and global, organized crime is small.
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Sorry, what I meant to say is "we need another stimulus". |
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