In The Warning, veteran FRONTLINE producer Michael Kirk unearths the hidden history of the nation's worst financial crisis since the Great Depression. At the center of it all he finds Brooksley Born, who speaks for the first time on television about her failed campaign to regulate the secretive, multitrillion-dollar derivatives market whose crash helped trigger the financial collapse in the fall of 2008.
"I didn't know Brooksley Born," says former SEC Chairman Arthur Levitt, a member of President Clinton's powerful Working Group on Financial Markets. "I was told that she was irascible, difficult, stubborn, unreasonable." Levitt explains how the other principals of the Working Group -- former Fed Chairman Alan Greenspan and former Treasury Secretary Robert Rubin -- convinced him that Born's attempt to regulate the risky derivatives market could lead to financial turmoil, a conclusion he now believes was "clearly a mistake."
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 [former Assistant Treasury Secretary] Larry Summers. He says, "You're going to cause the worst financial crisis since the end of World War II."... [He says he has] 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."
The current head of the U.S. Commodity Futures Trading Commission is Gary Gensler. He was a partner at Goldman-Sachs. Many of the people in the financial system within the Federal Government were from Goldman-Sachs and other large banks. Including Secretary of the Treasury, under Bush, Paulson who told the American people we had to bail the banks out with the first ever $700 billion bailout gift to the banks. Being this is the case, how balanced do you think the government weighs its decision processes for the American people over the banking and financial system?
Obscure Provision In New Patents Bill Suggests That Wall Street Owns The U.S. Congress
Section 18 of a new patents law passed by the House of Representatives last month serves no other purpose than to allow the banking industry to not pay for use of certain patents, Andrew Ross Sorkin reports at the New York Times' DealBook. Such an exemption has long been the goal of the banks and their high-paid lobbyists.
This provision should dispel any doubts as to how much power Wall Street wields in the U.S. Congress, Sorkin argues.
Banks have long complained about having to pay for use of patented "business methods"—like the processing of digital checks—that they consider integral to basic business practice. Section 18 would allow them to avoid paying for use of such business methods, even though the patents have been approved by both the U.S. Patent and Trade Office and federal courts.
Some opponents of the measure feel it would have unintended consequences beneficial for the banks, but negative for patent holders.
“It would be a tragedy if the greed of the big banks and their willing accomplices in Congress use this important legislation to trample the rights of legitimate patent holders and in the process weaken the integrity of our patent system,” Tom Giovanetti, head of the Institute for Policy Innovation, told DealBook.
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