Brooksley Born Excoriates Alan Greenspan: “You Failed”

Source: FDL

“You failed to prevent many of our banks from consolidating and growing to a size that are now too big or too interconnected to fail,” Born added. She added that Greenspan’s views on deregulation, which he took as an article of faith, contributed to the Federal Reserve’s failure in delivering on its mandate.

Looking as angry as he could at his advanced age, Greenspan replied, “The flaw in the system I acknowledged was an ability to fully understand the state of potential risks that were fully untested… That means we were under-capitalizing the banking system for 40 or 50 years.”

He then pivoted to a defense of his work, using an innocent bystander argument. “I don’t have the discretion to use my own ideology to affect my judgments on what Congress did. If somebody asked my view on a particular subject, I would give it to them. But I ran my office as required by law… I fundamenally disagree with your perspective.”

This is frankly ridiculous. Alan Greenspan was known during his days at the Fed as “The Oracle.” Every word of his moved the markets and moved politicians. His viewpoints absolutely contributed to the deregulation of the financial sector. He also had lots of broad discretion while at the Fed to deal with the housing bubble. Instead he hyped it.

If anyone was watching this but me and the WSJ, they would have seen a cornered rat. Born nailed Greenspan – although, given the relative lack of interest in the FCIC, the benefit to that will be merely psychic in nature.

Read more: http://news.firedoglake.com/

---

Brooksley Born was silenced in 1997 for her warning. I'm sure it gives her no pleasure in watching this train wreck....

Turns out he didn't.

I know more than a few economists who rejected neo-liberalism from day one and demonstrated publicly that the model would fail.

Ayn Rand Objectivist soup.

of legalized fraud. That's what they wanted and that's what they got, with regard to deregulation.

the extent of the fraud in the financial markets for the crisis and I believe said something to the effect that dealing better with fraud would have helped prevent or deter the situation. Please correct me if you understood something different in his testimony.

But toward the end, when, I believe Angelides confronted Greenspan with the fact that, in spite of warnings about fraud in the lending/subprime mortgage market from outside the Fed, the Fed had only reported two cases of fraud to the Justice Department, Greenspan stated that in general the Fed had been able to deal with the fraud through negotiation or pressure (not sure just what he meant).

Sorry. I'm paraphrasing far too much. I'm not reflecting Greenspan's testimony clearly and accurately. But I wonder whether someone else thinks, as I do, that Greenspan in a sense contradicted himself with regard to first the role of fraud in causing the crisis and second, the adequacy of the Fed's handling of the fraud.

As was pointed out during the hearing, there were public complaints about fraud and abuse in consumer lending before the crisis. Was the Fed too soft on fraud? Did the Fed consider preventing and reporting fraud to be its responsibility? If so, did it take that responsibility seriously enough? (Throughout Greenspan's testimony, he sought to shift blame anywhere but not on the Fed.)

On another topic, I thought it was interesting that Greenspan differentiated between this crisis which he considers the worst financial crisis in a century (!) and the Depression which he seemed to consider to be an economic crisis. So Obama inherited the worst financial crisis in a century. I hope that Democrats use that admission for what it is worth in the days to come.

As far as I and others on Main Street are concerned, THIS IS AN ECONOMIC CRISIS. The financial crisis has set off an economic crisis that still paralyzes the Main Street economy. Greenspan's perception of the impact of this crisis is, in my opinion, wrong. He is looking at what is going on from the Wall Street perspective. He does not seem to understand that the employment numbers he is shown in his ivory tower are not based on reality.

Many illegals who were working before the crisis have simply disappeared from Los Angeles. I don't know whether their jobs disappeared and they then left or whether they left and their jobs have been given to legal residents. But I doubt that the absence of illegals in the current stage of the crisis is reflected in the unemployment figures.

Also, the unemployment figures do not fully reflect the number of older people who simply dropped out of the job market. And I must say that the job market for older workers became difficult well before Wall Street started whining to Paulson that it was feeling the pinch.

I also have to say that my neighbor and I, neither of us economists, both just middle class maybe even lower middle class people, knew there was a housing bubble way back in the early 2000s. So, if Greenspan and the Fed did not notice the housing bubble, they have only themselves to blame for not keeping in touch with ordinary folks living in ordinary neighborhoods.

Also, the low interest rates for people speculating in real estate was the true cause of the subprime mortgage crisis. In my neighborhood, which is pretty typical of the kinds of neighborhoods in which people got subprime mortgages (lower middle class folks), there was a scandalous amount of speculation by people who bought really cheap properties, invested a little money and time in them and then resold them for a huge profit as prices rose higher, higher and still higher.

It wasn't the fact that houses were being sold to poor people that caused the bubble. It was that middle class people who could not get raises in their usual jobs started "investing" in houses and then reselling them to the poor who couldn't get capital to speculate with or who didn't know how to fix up houses or who simply didn't find the cheap houses fast enough. Remember when every radio station had ads for seminars on how to make a fortune in real estate? I had a friend who took courses like that. She had inherited houses so she was not speculating. But judging from my neighborhood there must have been a lot of people speculating on buying houses and then selling them to unqualified buyers. And I'm not even talking about the construction industry that was building houses like demand would never end.

Remember how Bush took credit for the increase in the number of homeowners in one of his State of the Union speeches? The "ownership society," wasn't that the slogan of the day?

Check out Ayn Rand and her "Philosophy" - of which Greenspan was an original acolyte.

http://en.wikipedia.org/wiki/Objectivism_(Ayn_Rand)

"an alternate name in analytic philosophy for philosophical realism, the belief that reality is mind-independent" This is what was used to drive our economy into a frenzy of greed and poverty? No wonder bush described wall street as being on a drunken binge.

of the term "sociopath."

..........an non event her life and writings really were. Conservatives have her, Reagan (fucking retarded idiot), "w" (what more needs to be said about him) and that's about it. I mean you have the conservative "intellectuals" like George (I love baseball) Will and Newt (do as I say, not as I do) Gingrich and I think that's about all.

But not with his money, schmuck.

speak about this as she tried to stop them, Greenspan included, and Obama's current team of deregulators, from doing what they were doing.

For her trouble, they aligned themselves against her and had her removed ~ we owe the Clinton administration another thank you for that.

I don't buy that Greenspan didn't know what he was doing. He was working for Wall St. I remember I used to wonder who or what this guy was with the briefcase, who never seemed to go away no matter who was president. And why so many people seemed to think that what he had to say was important.

The media never interviews people like Brooksley Born who is a financial genius and she knew what they were up to.

There is a PBS or Frontline video of her story online, it explains everything about how they destroyed this country's economy and how she tried to stop them.

His Randian personal ideology is what got the country into trouble, not the legal regulations.

so we needed to hurry, hurry, and cut taxes for the rich A LOT before the government has SO MUCH MONEY THEY CAN'T FIGURE OUT WHAT TO DO WITH IT ALL!

so of course they cut taxes before we barely make a dent in the debt, and unsurprisingly, the debt is now far bigger than ever.



the ultimate irony is that the scenario greenie so much wanted to avoid was the government holding equity in private companies because there was no other place to park all that extra loot. so when the financial sector crumbled, what did the fed do?

why, buy up equity in private companies, of course.

and yet look what happened to her career when she spoke up... No good deed goes unpunished I guess. :grr:

Anyone who hasn't seen this video from Frontline should watch it. Greenspan, Rubin and Summers played a direct role in the collapse of the economy. Brooksley Born tried to stop them but she was driven out of her job and viewed as causing trouble.

The Warning

Born's battle behind closed doors was epic, Kirk finds. The members of the President's Working Group vehemently opposed regulation -- especially when proposed by a Washington outsider like Born.

"I walk into Brooksley's office one day; the blood has drained from her face," says Michael Greenberger, a former top official at the CFTC who worked closely with Born. "She's hanging up the telephone; she says to me: 'That was Larry Summers. He says, "You're going to cause the worst financial crisis since the end of World War II."... 13 bankers in his office who informed him of this. Stop, right away. No more.'"

Greenspan, Rubin and Summers ultimately prevailed on Congress to stop Born and limit future regulation of derivatives. "Born faced a formidable struggle pushing for regulation at a time when the stock market was booming," Kirk says. "Alan Greenspan was the maestro, and both parties in Washington were united in a belief that the markets would take care of themselves."

Now, with many of the same men who shut down Born in key positions in the Obama administration, The Warning reveals the complicated politics that led to this crisis and what it may say about current attempts to prevent the next one.

"It'll happen again if we don't take the appropriate steps," Born warns. "There will be significant financial downturns and disasters attributed to this regulatory gap over and over until we learn from experience."

They cover for each other. Greenspan is pretending that he was just mistaken. But this video shows how unwilling any of them were to even to listen to a voice of reason as all of them believed in an unregulated market. Born should have been considered an asset to any administration that really cared about the country's best interests. Instead, she was driven out of her job, and there was no one else who could stop them.

She was right then, and if she is right now, and there's no reason not to believe she is considering we have the same people in charge of it all again, we will face more disaster.

knew things weren't right but he ignored the warnings.

"Why in the face of all the subprime lending did you not move to contain abusive subprime lending?" asked the panel's chairman, Phil Angelides.
Greenspan replied that the institutions subject to the Federal Reserve's or other federal-banking regulators were not the primary players in the subprime-loan origination business....

Angelides argued that Greenspan was warned to start examining these kinds of lenders, but did nothing.

The panel chairman said that Greenspan ignored a Fed staff memo in August 2000, entitled "Compliance inspections of nonbank subsidiaries of bank-holding companies," which suggested launching a pilot program to examine these types of lenders. Angelides also pointed out that in 2004, also during Greenspan's tenure, that the Government Accountability Office urged action, noting "a significant amount of subprime lending among holding-company subsidiaries."

Yet there was "no action, no willingness to go in and examine a nonbank subsidiaries," he said......

"Would you put this under the category of 'Oops, we should have done it'?" he asked.

"I don't know," Greenspan replied



http://www.marketwatch.com/story/greenspan-housing-bubble-was-not-created-by-fed-2010-04-07?dist=countdown

anything that might stop them. But if you follow the money, each and every one of them have profited greatly during a time when the rest of the country is experiencing nothing but losses.

Those hearings are useless. I like how they ask him, 'was it just an 'oops' type situation, 'we should have done something?' That's called a leading question, in this case to make it look like a little mistake, to allow him to look like maybe they just didn't know what to do, when in fact it was far from it.

Larry Summers, Tim Giethner and Wall Street ownership of government

They all joined forces to stop Brooksley Born from regulating or even suggesting it, the derivatives market.

/Rubin, Summers and Greenspan succeeded in inducing Congress -- funded, of course, by these same financial firms -- to enact legislation blocking the CFTC from regulating these derivative markets. More amazingly still, the CFTC, headed back then by Born, is now headed by Obama appointee Gary Gensler, a former Goldman Sachs executive (naturally) who was as instrumental as anyone in blocking any regulations of those derivative markets (and then enriched himself by feeding on those unregulated markets).

Just think about how this works. People like Rubin, Summers and Gensler shuffle back and forth from the public to the private sector and back again, repeatedly switching places with their GOP counterparts in this endless public/private sector looting. When in government, they ensure that the laws and regulations are written to redound directly to the benefit of a handful of Wall St. firms, literally abolishing all safeguards and allowing them to pillage and steal. Then, when out of government, they return to those very firms and collect millions upon millions of dollars, profits made possible by the laws and regulations they implemented when in government.

She was met with vicious opposition to her warnings. This government is totally owned by Wall St. It doesn't matter who is in power, Rs or Ds, they all work for their corporate bosses, and the people get crumbs, and lies and wars.

Greenspan played his part in creating a system designed to help Wall Street loot the economy. He couldn't have been more successful.

Unless you subscribe to the belief that investment bankers stumbled into their millions, and keep amassing their millions, through sheer bumbling incompetence. Okkkaay...

This is what banks do. A bank takes money from people who want their money to be invested while they are sleeping and the bank itself put the money in another stupid invention in banks that invest in money that are invested in money that are invested in money etccccc.......
Bank is never a safe industry it is a cycle of a money game that starts and ends weather you like it or not. It is a game and never an industry. There is no real industry that will make your money grow more than 10% a year. It is pure gambling.

mere banks converted to holding companies, which reinvented the held instruments. more than pure gambling.

the oligarchical collectivists. That's what you Randroids don't get. Your naive assumptions about the economy and your ridiculous misreadings of philosophy make you an easy target for manipulation. They used your position and your jargon-laden pronouncements as a cover to loot and plunder. Great work Alan. Great work. Mission accomplished."

Turns out when you base all of your decisions on computer generated models that are grounded in factually erroneous assumptions, no matter how impressive sounding the jargon you use when discussing those models, your grounding in reality is about as firmly planted as the demented street-corner preachers in Times Square. You could have just as easily said to congress every time they wanted your excuses for inaction, "shiny wizards bring the rain! let's sit tight for their guidance. Once their fight with the flying spaghetti monster is over, they'll send us the answer via the Invisible Hand and/or carrier pigeon."

I Do Not Know What I Do Not Know
By: David Dayen Wednesday April 7, 2010 1:33 pm
Tweet
Share

If you’re wondering how Goldman Sachs and the other big financial firms can get away with their fantastic amounts of looting and pillaging, you have to read this excerpt from a conversation between Vanity Fair’s Graydon Carter and author Michael Lewis:

You will probably get sucked into Lewis’s hour-long talk, just as the House Republican book group became engrossed in a lecture Lewis gave about the financial collapse. “I was supposed to be there for an hour,” says Lewis in the clip above, referring to his visit with the Hill staffers. “I was there for almost three. And nobody left. And their questions were increasingly: ‘Oh my God, Goldman Sachs did what? A.I.G. did what?’ They didn’t understand it … The minute they started to understand, they were outraged. And I think the more things are explained, the more outraged people will get.”http://news.firedoglake.com/2010/04/07/i-do-not-know-what-i-do-not-know/

Regulators "were undercapitalizing the banking system for 40 or 50 years," he said, suggesting that the problem predated his 18-year tenure.

Read more: http://www.mcclatchydc.com/2010/04/07/91785/ex-fed-chairman-greenspan-says.html#ixzz0kVjA1kEL

Couldn't believe it when I heard it.

Bill Moyers did a show on her a few weeks ago. It should be repeated again, and again, and again until the idiots in this country wake up.