Popular magazines meet the financial crisis ( some very interesting theories )

Market Watch ^ | March 30, 2009 12:59 a.m. EDT | Peter Brimelow, MarketWatch

[Ernest_at_the_Beach]

Atlantic, Rolling Stone give their takes on the government's role

NEW YORK (MarketWatch) -- Out of the mouths of ...? Two very fashionable non-financial magazines have just published powerful analyses of the current financial crisis. The implications are grim.

Although radically different in tone, both articles ( "The Big Takeover," by Matt Taibbi in the April 2 Rolling Stone, and "The Quiet Coup" by Simon Johnson in the May issue of Atlantic) reach remarkably similar conclusions.

As Taibbi puts it in his brilliant but unquotable-in-MarketWatch Gen X style: "People are [expletive deleted] about this financial crisis, and about this bailout, but they're not [expletive deleted] enough. The reality is that the worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup d'état. They cemented and formalized a political trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations. The crisis was the coup de grâce: Given virtually free rein over the economy, these same insiders first wrecked the financial world, then cunningly granted themselves nearly unlimited emergency powers to clean up their own mess."

Paranoia? Taibbi supplies devastating detail about the way the subprime mortgage crisis metastasized through American International Group Inc.'s promiscuous use of "credit default swaps," the central role of Goldman Sachs Group Inc. and the opaque nature of the consequent bailouts.

[Ernest_at_the_Beach]

fyi

[blam]

I read the whole thing but I’m not sure what it said.

[ChicagahAl]

"The reality is that the worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup d'état."

True.

IMHO, the whole market meltdown was orchestrated. And it's chain is still being jerked.

[Ernest_at_the_Beach]

This snippet is interesting:

******************************EXCERPT***************************

What perhaps was the pivotal moment -- Commodity Futures Trading Commission Chair Brooksley Born's attempt to regulate credit default swaps -- was frustrated by Fed-head Alan Greenspan, SEC Chairman Arthur Levitt and Treasury officials Robert Rubin and Lawrence Summers in 1998, during the Clinton administration.

[calcowgirl]

Thanks for the ping, Ernest. I read Taibbi’s piece last night and, despite the source, agreed with much of where he lays the blame. He left out a few related actions that also contributed, but after 8 pages, I think he covered the meat of it.

http://www.freerepublic.com/focus/f-news/2217857/posts
The Big Takeover - AIG

[calcowgirl]

And ABC is also pointing fingers at Cassano (as Taibbi did)

http://www.freerepublic.com/focus/f-news/2218622/posts
The Executive Who Brought Down AIG

[Ernest_at_the_Beach]

Found this:

The Great Clash of '09

**************************EXCERPT***********************

A looming battle over re-regulation

Dec 24, 2008 | Updated: 10:51  a.m. ET Dec 24, 2008

Amid the economic chaos of 2008, Arthur Levitt Jr. stands out. He's one of the very few regulators of the Clinton and Bush eras to take responsibility for the current financial disaster—to admit that he botched things, big time. "All tragedies in life are preceded by warnings," the former chairman of the Securities and Exchange Commission told me in an interview Tuesday. "We had a warning. It was from Brooksley Born. We didn't listen to that." Brooksley Born was the head of Commodity Futures Trading Commission (CFTC) under Clinton. Beginning in the spring of 1998, she pushed for the regulation of derivatives trading. She warned of the dangers of a vast global financial market that was going unchecked by governments. But she was silenced by the then all-powerful team of Federal Reserve Chairman Alan Greenspan and Treasury Secretary Robert Rubin. Levitt, who along with Greenspan, Rubin and Born was part of the four-person President's Working Group on Financial Markets, opposed her efforts as well. Today, Levitt says he was wrong. "It may well have been that the proposal was ill thought-out," says Levitt, who served as SEC chairman longer than anyone, from 1993 to 2001. "But we could have taken that opportunity to refine it, to make it forward-looking. I think that the explosive growth of a product that was unlisted and unregulated should have occasioned greater reaction."

Levitt's concerns go beyond assuaging his conscience about the past. Along with other financial markets experts, he is worried that the incoming Obama administration, populated with protégés of Rubin and Greenspan, may continue to resist the necessary regulation needed to restore confidence in Wall Street and prevent another subprime-type disaster in the future.

[Ernest_at_the_Beach]

Scapegoat?

Who did he pay off?

[Robwin]

I read the whole thing but I’m not sure what it said.

I think it said [expletive deleted]

[calcowgirl]

Scapegoat, maybe. I find it hard to believe that he could have pulled this off by himself, without others (e.g. Greenberg) being the least bit curious as to what he was up to. And the total lack of oversight stinks to high heaven. From the OTS to the SEC to Congress. I’m not talking about the absence of regulation as much as the literal absence of any effort to monitor or enforce the regulations that were in place. They all dropped the ball.

I actually think it goes a lot deeper than that, but until I have more proof I’ll remain silent and avoid being labeled a tin-foiler. ;-)

[Ernest_at_the_Beach]

More on the regulating or lack of it.....Newwsweek:

Obama’s Weak Links

**********************EXCERPT*******************

Can the president's two top financial regulators repent their past sins?

By Michael Hirsh | Newsweek Web Exclusive

Feb 26, 2009

I think we're safe in calling it, for posterity, President Obama's "Day of Reckoning" speech (it's not FDR's "Rendezvous With Destiny," but it's not bad). In his address to a joint session of Congress this week, Obama said America was paying for the mistakes of the past, when difficult decisions about our economy were put off and "regulations were gutted for the sake of a quick profit." Now, he said, our day of reckoning has arrived.

What the president didn't say was that the people he has placed in charge of the reckoning are sometimes the ones who did the gutting. Or at the very least, they're the ones who obstructed the reckoning for years.

This is particularly true of the two people Obama has named to be the nation's top financial regulators: Mary Schapiro, chairman of the Securities and Exchange Commission, and Gary Gensler, whose hearing to be confirmed as head of the Commodity Futures Trading Commission was held on Wednesday. Schapiro failed to assert control over derivatives trading as the head of the CFTC in the mid-'90s, a time when it was already beset with fraud and manipulation. When a successor, Brooksley Born, came in, she called the unregulated derivatives market "the hippopotamus under the rug." As CFTC chair, Born tried to rein things in but was rebuffed by the Treasury Department, of which Gensler was a part.

Later, when Schapiro was running the Financial Industry Regulatory Authority (FINRA), she also missed Bernie Madoff's Ponzi scheme and now, we learn, R. Allen Stanford's alleged mini-Madoff scam. According to Reuters, associates of Stanford's, as was the case with Madoff's family, even served as advisors to FINRA, the industry's ostensible "self-regulator" (though it was widely seen as a joke in the industry). In both her jobs Schapiro followed a pattern: she tended to aggressively investigate relatively minor violations while failing to see the hippopotamus-size frauds in the room.

Gensler's past efforts to block derivatives regulation are no secret, and Sen. Tom Harkin, chair of the Senate Agriculture Committee, wasted no time in reminding Gensler of one such case on Wednesday. At a hearing on May 15, 1999, Harkin noted, Gensler said he "positively, unambiguously" agreed with then–Treasury Secretary Larry Summers in his testimony to the committee opposing additional regulation of the institutional over-the-counter derivatives market (in other words, the market that traded off exchanges). At the time, Harkin said, Gensler went on to argue that the "vibrancy and importance" of the global over-the-counter derivatives market "put the burden on those who are suggesting changes and further regulation … before we tamper on some of the successes of this marketplace for the economy." Well, said Harkin, "that's quite a resounding, unqualified and categorical statement, no second thoughts or ambiguity."

At the hearing, Gensler expressed some contrition and said he's seen the light.

[cherry]

anecdotal evidence of this country's problems have been evident to the mere peasants for some time:..people buying huge homes and cars and boats and never thinking twice of it, and you sit there and wonder how they could afford all that when the truth was , they couldn't afford all that....

Ceo's getting multimillions in bonuses and golden parachutes....

public employees retiring on more money than they ever earned while "working"...

Payrod getting 1/4 of a billion dollars in his contract?

these things make you go "hummmmm" in the middle of the night.....

but having said all that, there is a big part of me that says this whole thing was orchestrated to line the pockets of the elite rich by ripping the rest of us off.....

[calcowgirl]

I know my opinion on this won't be popular to some, but here it is. We have to quit trying to pin the cause of the "financial crisis" on one administration or the other, or one party or the other. The fact is, there is plenty of shady stuff happening on both sides of the aisle and way too many folks (of all ideologies) complicit in the whole mess. As the Pubs point at the Dems, and the Dems point at the Pubs, the sheep somehow think they are being protected. They're not -- they (WE) are getting screwed by both sides! It's a nice diversion and lets everyone show their anger while nothing is ever done about it. I consider it a "bipartisan" fleecing by "bipartisan" crooks.

Now, as to this ridiculous "solution" of pouring TRILLIONS into bailing out everyone and their mother, taking over the automotive industry, etc., that we can clearly place in the Obama's camp.

[calcowgirl]

I don’t disagree... but I think it was about more than money.

[Ernest_at_the_Beach]

Just thought of this....why isn’t Larry Summers the Treasury Head....cause to get there he would have to gp before the Senate for Confirmation.....

[calcowgirl]

Been there, done that. Besides, he groomed Geithner for the job.

[RightOnTheLeftCoast]

Any analytical account of the economic crisis that fails, in its first three paragraphs, to mention the Community Reinvestment Act, Barney Frank or Chris Dodd, is not fit for birdcage lining.

These articles are all about shadowy “insiders” mounting “coups” on behalf of eeeeeevil corporations and institutions. The real culprits prance about in broad daylight in Washington. And the root cause of the crisis, the CRA, chugs along untouched.

[GOPJ]

...trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations.

Interesting financial/political analysis ping.

[lentulusgracchus]

Think you might have yourself a smoking gun there, Ernest.