There are very few places where having the right connections and the right school, and the right parents, count more than Washington. With bank accounts to match of course. Even interns have to have the right look and an Ivy League Degree to get in the door. Monica Lewinsky was hardly poor. When you look at the backgrounds of who makes the decisions in both the banking industry and the political elite, they are just the same. There’s a reason that Congress is not going to be a good place to regulate the financial industry this time, just as it wasn’t the last time around.
The current stalling of the industry in Congressional hearings, and the apparent lack of Congress to do anything about it, is a perfect example of Congress’ lack of ability, short of passing draconian reforms (which they won’t do because it’s not in their best interest financially or professionally) to effect real reform. Not to mention that most of Congress, despite what the public thinks, is financially illiterate. A decade ago, most of them didn’t even know what a derivative was when they let them loose on the world. They just figured, in the fight described below, that men knew more about finance than the woman who opposed them.
Because in the late nineties, Congress was in a direct position to have stopped this global meltdown from happening in the first place. It was precisely because of what they did not do and understand, combine with what they destroyed, that caused the current pickle we are in today. The Warning Bell That Was Disregarded In the late nineties, Brooksley Born, the highest ranking woman in official Washington with a role in economic policy, battled against the tripartite of Summers, Rubin and Greenspan over deregulated derivatives, before four separate Congressional hearings and publishing a report on the danger of said instruments.
To further give weight to her warnings, at the same time, a hedge fund called LTCM went belly up for its dependence on such instruments, precisely the scenario that Ms. Born had predicted. Just as they were debating the future of an unregulated derivative world, and destroying Glass-Steagall, Congress was told, in a rather chilling echo from the past, that if LTCM were not bailed out and done so in the space of four days, the future of the entire American financial system was in peril of complete collapse, language that sounds almost exactly the same as the wording used by fellow Goldman Sachs alum Mr.
Paulson in the fall of 2008 when the entire financial industry on Wall Street suffered the same fate because of their same reliance on the same kind of financial product. In the late nineties, however, LTCM was passed off as a fluke, Ms. Burn’s predictions dismissed and the “Real Men” in the room dealt with what they claimed was a one off problem. Again, a sign of such crooked corruption and deceit, one can only call the preps white collar criminals, whether they worked as ostensible public servants (because within a year Mr.
Rubin would be gone to the private sector and a bank, Citigroup, he helped create with his tenure in “government service” and Mr. Summers would depart shortly thereafter, both to very lucrative gigs in the financial world of Wall Street, and both benefitting from their decisions and deals on Capitol Hill just a few years prior. ) If that is not criminal white collar crime, what other term can be used to describe it? It’s called setting up the heist... The deal worked out by Rubin and Co.
in the case of LTCM, was that 14 major banks would step in and bail the firm out. Case closed. But they also shut down Ms. Born at the same time. They convinced Congress to strip her of her power, which of course they did. She resigned shortly thereafter. But in 2001, the same thing happened all over again with Enron. Again, Congress did nothing. This time of course the players in the administration, with the exception of Alan Greenspan were different, but the philosophy was the same. Nothing was done to awake the watchdogs or regulators.
In fact they were either deliberately further reduced, defunded, or fed additional figurative sleeping pills. The fact that the same players have shown up again in a new administration promising change that hasn’t done anything yet, and is still refusing to regulate derivatives, continues to dally with regulation, does not support the re-introduction of Glass-Steagall, is playing semantics about executive pay caps, and in short refusing to call the industry to heel, is a sign that the administration is both off course and those in power have not learned their lesson yet.