Sunday, October 25, 2009

A Great Documentary on the Mechanics of the Credit Crisis

It’s called The Warning and it’s a Frontline feature.

It tells the story of Brooksley Born, an attorney who’d been on Bill Clinton’s short list for Attorney General. Apparently passed over for Janet Reno, because Clinton found her “boring,” Ms. Born then became head of the Commodity Futures Trading Commission (CFTC).

She’d been a lawyer who’d specialized in Derivatives trading, so it was only natural that she came into that position alarmed at the stunning lack of oversight, even basic bookkeeping requirements for Derivatives Trading.

The Warning documents the incredible and naïve faith that Alan Greenspan and his two main protégés, Larry Summers and Robert Rubin (pictured above, left to right) in human beings being “basically honest” in their transactions. Ironically enough, Tim Geithner was Robert Rubin’s primary protégé. The result was that the triumvirate of Greenspan, Summers and Rubin blocked Brooksley Born’s attempts at getting some oversight into the derivatives market at every turn.

The ultimate result was the NOBODY knew what was going on in the derivatives markets INCLUDING the investors, who were told to “abandon your pens and pencils and laptops upon entering these Conference Rooms.” They were sold on 40% and higher returns, without even knowing what they were invested in!

Between a Derivatives Market without even the most basic of oversight protections and a government intent on expanding home mortgages to more low-income and poor Americans, the scene was set for “the perfect financial storm” that washed ashore here in September of 2008.

The Warning is a documentary well worth watching! Especially given the fact that much of the current administration’s HOPE and CHANGE...or perhaps HOPE for CHANGE rests on its current economic team, which includes Larry Summers, Robert Rubin and Treasury Secretary Tim Geithner, who ALL played a HUGE part in the run-up to our current mess!


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