Warning went unheeded

The more we look back into our lack of oversight and regulation, it becomes more clear how many warnings we missed and how much our leaders, economists pushed us into this turmoil. After all, hindsight is 20 20.

I watched this Frontline Documentary, and it clearly showed us a whistleblower who wanted to regulate derivatives trading. Like many whistleblowers, she was crushed. She got pummeled in senate hearings. Since she couldn't pass the reform she resigned from her office. Exactly after 10 years, wall street crashed burning away the savings and retirement money of millions of Americans.



for those who couldn't watch the whole 55 mins, here's the overview.

Brooksley Born was the chairwoman of CFTC in Clinton administration. In 1998 she looked at the lack of regulation on OTC derivative trading and tried to put a leash on it. She was pushed back by the trio of Alan Greenspan, Robin Rubin and Larry Summers. After senate and congress committee hearings Free market proponents prevailed. Brooksley left her job.

Soon, a big Hedgefund LTCM went under and Fed orchestrated a bailout with the help of big banks. This is the exact scenario which Broosley warned the congress about. Policy makers missed this big warning. And we all know the rest of the story.

But if we had acted on this warning we could've avoided (wishful thinking) this implosion. But trio didn't want our free markets hindered by regulation just for the sake of regulation.

Actually, except the tail end of last decade, Laissez-faire worked flawlessly. Atleast seemingly. Greenspan's low interest rates, Housing bubble kept everybody happy. Larry kudlow said that there's no such thing called hosuing bubble. (He's an Epic failure, I wonder why he's still employed) And then the Bear Sterns bankruptcy, Lehman's brothers bankruptcy. Financial system fell into fear and Panic. I wonder, what's the Free Market's proponent's response for this.

Being a fan boy of Frontline, I can go on and on about their Journalistic virtues and how they're the torch bearers' of the Fair journalism. But I've to appreciate their story telling style one more time. I liked the way they end their story.

Robin Ruben went to lead Citibank and it got 100Billion Tax payer money as a bailout. Alan Greenspan is every where from Senate hearings and Think tank meetings defending his tenure as Fed chairman. Some how people are not buying it.

What bothers me is the same people who caused this meltdown are in Obama administration. Larry summers is chief advisor for Obama and Tim Geithner is the Treasury secretary. These two are the proteges of Robin Ruben and now these are the people who're gonna protect us from another meltdown. Hmm, I guess this isn't the Change we're expecting.

Alan Greenspan got too much credit for the last two decades. He's called as wizard, maestro, rockstar for the booming 90s and 2000s. Bush even presented him with Presidential Medal of honor. But now truth is slowly emerging and his legacy is at risk now. He agreed that he's partly to blame for this meltdown but also blamed greed of bankers for this. But hey, Regulation is used to control greed and prevent people from doing stupid things.

I have some beef with Ayn Rand philosophy which I'm dying to write for the last few months. I didn't read any of her books yet but I got the gist of her work. She's a libertarian and wouldn't want a bit of regulation on Market. For all those ardent worshipers of Ayn Rand, this is my question. Last two decades of US Market is what Ayn Rand asked for, and we ended up in this Abyss. How exactly are they gonna defend her objectivism.

Ayn Rand's work gained popularity and creed cause of the times she lived. Fear of communism made Libertarianism glamorous. But all good things will come to an end, same with the Ayn Rand's Libertarianism influence. No follower of'er is more powerful/influential than Alan Greenspan. And he couldn't prove that her principles actually work.

Anything is moderation is good, either free market or Regulation.

Now, how can we prevent another turmoil? Even today Wall st is minting billions with derivatives trading. And here's the kicker. This time they're using TARP funds for that. That's tax payers money. Some thing is seriously wrong.

Chris Dodd, since you decided not to run for another term of senate, please pay back to American public at least once. Try to pass a real financial regulation reform. Not a toothless one which is before Congress now.

And yes, please bring back Glass-Steagall act.

Peace.

P.S. As economists and historians are questioning Greenspan's Legacy now, could they also question Milton Friedman's theories. It wouldn't hurt.