Brooksley Born Excoriates Alan Greenspan: “You Failed”

FDL News Desk ^ | Wednesday April 7, 2010 | David Dayen

[dangthis]

"At today’s Financial Crisis Inquiry Commission hearing, Brooksley Born, the former head of the Commodity Futures Trading Commission, declared Alan Greenspan’s tenure at the Federal Reserve an unmitigated failure – to his face. Greenspan accords a certain degree of respect on Capitol Hill, despite Born’s accurate take on his many failures, and so this outburst was highly unusual – and gratifying.

Born, who pushed to strictly regulate derivatives under the Clinton Administration, but lost the battle to, among other people, Alan Greenspan, told the former Federal Reserve chair that his agency “failed to prevent housing bubble, failed to prevent the predatory lending scandal, failed to prevent the activities that would bring the financial system to the verge of collapse.”

“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."

[Captain Kirk]

The current mess is the result of scrapping Glass-Steagall in the late 90s and allowing a huge highly leveraged shadow banking system to develop.

That theory doesn't work. Western European countries has far fewer restrictions have far fewer restrictions on investment and commercial banks yet the bubble did not happen there first. Besides, Glass Steagall was repealed nearly two decades ago. If you want the culprit, you need to look at more recent events such as the Fed's unsustainable rapid cuts in the discount rate during the Bush administration.

[dangthis]

Fannie and Freddie played too: “What are Freddie Mac’s principal businesses?”

“Freddie Mac supports liquidity and stability in the secondary mortgage market through two principal lines of business. Our credit guarantee business purchases residential mortgages and mortgage-related securities in the secondary mortgage market, securitizes these mortgages and subsequently sells them to investors as mortgage-backed securities. We also have a portfolio investment business that purchases mortgages for our mortgage-related investments portfolio.”

The government guaranteed that the market was kept in the dark and they got on board too. But they made sure that the market was unregulated. The cats out of the bag. The government gave the green light to this potentially dangerous market. It allowed these frivolous loans to happen. In fact it mandated it to these independent bankers. It was a bunch of liberal social engineering programs, the independent banking scheme, the potentially dangerous financial instruments, the credit default swaps, Barney Frank saying that everything is just fine, and nobody looking at the history of the housing market. Politicians were getting their money too. So why not just go along with Greenspan. They all gambled and they all lost. Only they put the tax payer on the hook for everything. There is no way it was just the banks.

[dangthis]

More convenient information: “Not true at all. The Fed was slashing the discount rate below market rates throughout most of the Bush administration. One of the goals was to keep the artificial housing boom on track.”

That is not why the rates were slashed. Clinton had put almost all of America’s debt in short term loans. Bush set out to get those loans converted into more long term loans. The purpose of rate reduction was to prevent inflation from causing a rate hike in the short term lending markets. Bush got us out of the short term markets and saved this country from the disaster that crashed the housing market. All short term lending dried up. I wonder what type of loans Obama is backing all this wild spending with now? Government always goes for the dumbest move possible. That’s right, Obama has gobbled up all the short term credit available. Here we go again. And you might have wanted a job. You silly fellow.

To pass the buck and claim it was to prop up a housing bubble is almost delusionary in thinking. It sounds like you have bought into one of the excuses passed down by politicians. If I understand this, Bush was the co-founder of the social engineering experiment in housing. Yeah, that makes sense. LOL

[I Buried My Guns]

Your name fits you.

You're rude!

[1rudeboy]

Thanks. Would you like to direct your comment to the poster that began with the personal attacks?

[I Buried My Guns]

Yes!

[1rudeboy]

Fail.

[I Buried My Guns]

Waah, must call waaambulance!

[Arthur Wildfire! March]

Why have unregulated Canadian banks been so successful? I believe our love of small banks is one of our problems. I’m no authority, but as I understand it, our mini-banks fell like dominoes back during the Great Depression. I heard Mark Stein talk about the success of Canadian banks as well — less government control.

Bubbles very often come from government manipulation, such as coercing banks into accepting higher credit risks, or tempting them with artificial safety nets.

[Arthur Wildfire! March]

“Brooksley Born is not a Obama plant. She is not an anti capitalist.”

But even anti-leftists are useful to the left if they turn against an enemy of the left. They use people that way.

[Arthur Wildfire! March]

“This market was essentially entirely unregulated and in many ways invisible to everyone except the immediate actors. It measured in the trillions of dollars.”

My gut tells me this — the international banking forces that are able to bypass regulation, those are not run by nitwits. They need a sucker to work over, such as a corrupt government that can work out some angle for them.

[Arthur Wildfire! March]

Nutty as it sounds, Russia was behind the orchestrated meltdown that led to Obama’s rise — no joke. It’s a long read, so I’ll post it in a response to this.

[Arthur Wildfire! March]

[In light of Russia’s attempt to manipulate Fannie/Freddie bailout during China’s Olympics ...]
YouTube:Shocking Video Unearthed Democrats in their own words Covering up the Fannie Mae, Freddie Mac Scam that caused our Economic Crisis
http://www.youtube.com/watch?v=_MGT_cSi7Rs&feature=channel_page

More light shed on the way we are economically manipulated.
Russia Urged China to Dump FANNIE, FREDDIE Bonds...
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=afbSjYv3v814
http://www.freerepublic.com/focus/f-news/2441326/posts
“This is indicative of how dangerous the Chinese holdings of U.S. debt are. It is a huge financial weapon ...”

- - -

Shocker: Electronic Money Market Run Nearly Destroyed US Economy
http://www.freerepublic.com/focus/news/2183027/posts?page=117

Shocker: Electronic Money Market Run Nearly Destroyed US Economy
RushLimbaugh.com ^ | February 10th | Rush

Posted on Wednesday, February 11, 2009 3:03:27 AM by Halfmanhalfamazing

RUSH: I want you to listen to this, Paul Kanjorski. He’s a Democrat member of Congress from Pennsylvania. He was on C-SPAN’s Washington Journal on January 27th.

KANJORSKI: On Thursday at about 11 o’clock in the morning —

RUSH: Stop the tape a second. Go back and recue this. He’s talking about September the 18th here. Let me tease you even further. September the 18th is the day last year that the world economy almost came to an end. Don’t smirk. It’s true, Snerdley. That’s what Kanjorski is saying. So he’s talking here about Thursday, September the 18th.

KANJORSKI: On Thursday at about 11 o’clock in the morning the Federal Reserve noticed a tremendous drawdown of money market accounts in the United States, to the tune of $550 billion was being drawn out in a matter of an hour or two. The Treasury opened up its window to help. It pumped $105 billion in the system and quickly realized that they could not stem the tide; we were having an electronic run on the banks. They decided to close the operation, close down the money accounts and announce a guarantee of $250,000 per account so there wouldn’t be further panic out there.

RUSH: Do you remember this? This is the day I think that the Atlanta banks ran out of one-hundred-dollar bills. But now stop and think of this: A $550 billion withdrawal from money market funds in one-to-two hours. I am convinced — and there’s one more sound bite to go here — I am convinced that this is what they took to the White House and said to President Bush, “We have got a disaster, you have got to get on board with a bailout,” which came later on in October, “you’ve got to get on board with this $700 billion, the TARP 1,” all because 550 — now, what precipitated this? Here’s the second Kanjorski sound bite.

KANJORSKI: If they had not done that, their estimation was that by two o’clock that afternoon, five-and-a-half trillion dollars would have been drawn out of the money market system of the United States, would have collapsed the entire economy of the United States, and within 24 hours the world economy would have collapsed. It would have been the end of our economic system and our political system as we know it. We’re really no better off today than we were three months ago because we’ve had a decrease in the equity positions of banks because other assets are going sour by the moment.

RUSH: Now, this is January 27th, Kanjorski is talking about this, and we have to allow, since Kanjorski is a Democrat he’s part of the Pelosi team, we have to allow that some of his comment here is being flavored. When he ends up saying we’re no better off today than we were three months ago, some of this is obviously oriented toward panic and getting people to go along with the bailout today, but let’s leave that aside because that’s traditional Democrat Party politics. If they had not done that, if that $550 billion-dollar withdrawal in an hour or two had not been stopped, if they hadn’t closed the windows, he says that five-and-a-half trillion would have been drawn out of the money market system of the United States. Now, when I hear money market I think of savings accounts, higher interest rates than passbook savings at the old downtown building and loan where people park their money temporarily ‘til they decide where to put it permanently. He says five-and-a-half trillion would have vanished from the banking system, would have collapsed the entire economy of the US and within 24 hours the world economy would have collapsed.

Now, we’ve gotta allow here for some exaggeration. It’s amazing this was said on C-SPAN on Thursday, January 27th, and nobody picked up on it. We got it from a website called LiveLeak. They were rummaging through things, and they found this. Now, let’s assume for a second here that elements of this are true. Let’s assume that there was a $550 billion run, electronic run on the banks and money market accounts in one to two hours. The question is who was doing this? Who was withdrawing all this money? And the next question is why? That’s where my mind starts exploding, and this is dangerous to have these explosions going this way. Could it have been George Soros? Could it have been a consortium of countries — Russia, China, Venezuela — countries that are eager to have Barack Obama elected because they know that will make it easier for them to continue their own foreign policies in the world? In the meantime, five-and-a-half billion dollars in one to two hours, that can probably be confirmed. The five-and-a-half trillion is speculation based on the rate at which money was coming out. We could check that the Fed stopped the trading windows, they closed the window. We do know they were pumping money into the system left and right. And remember when the Federal Reserve loaned elements, $2 trillion and we weren’t told who got the money? And we still haven’t been told who got the money.

We know that last fall, the Federal Reserve lent $2 trillion to somebody or a series of somebodies, and we still don’t know where it went. We know last year that we had a crisis on our hands and everybody was saying if we didn’t do this today the country was finished and they got Bush on board, they got Paulson on board. Obviously this kind of news, if somebody from the Fed shows up and Bernanke and Paulson say, “Hey, we got a chance here of losing five-and-a-half trillion dollars if we don’t do something,” I mean that’s gotta scare anybody into some sort of action to stem the tide. RUSH: We have an AP-Obama story here that targets the date of this run on money market accounts to September 16th. It was Kanjorski on C-SPAN on January 27th, said it was Thursday the 18th. Here’s the AP story: “A money-market mutual fund that ‘broke the buck’ amid a rush of orders to pull out cash has begun returning an initial $26 billion to investors who had been unable to access their money for more than a month. ... On Sept. 16, the rapid sell-off of assets caused the value of fund assets to fall to 97 cents for each investor dollar put in — the first instance in 14 years of a money-market mutual fund ‘breaking the buck,’ or having its per-share value fall below $1. Reserve Management froze redemption orders. That led institutional investors to pull out cash...” I think both dates are right. September 16th, the rapid sell-off begins and “[t]hat led institutional investors to pull out cash from that fund and others, creating fears about the safety of the $3.4 trillion in assets held in money-market funds, and a new temporary government money fund guarantee program.’” It’s sort of just a casual, hey, no-big-deal kind of story from the Associated Press — and here again is Kanjorski talking about this. Let’s go back to these two sound bites, Paul Kanjorski (Democrat-Pennsylvania) on C-SPAN’s Washington Journal on January 27th.

KANJORSKI: On Thursday at about 11 o’clock in the morning, the Federal Reserve noticed a tremendous drawdown of money market accounts in the United States to the tune of $550 billion was like being drawn out in a matter of an hour or two. The Treasury opened up its window to help. They pumped $105 billion in the system and quickly realized that they could not stem the tide; we were having an electronic run on the banks. They decided to close the operation, close down the money accounts and announce a guarantee of $250,000 per account so there wouldn’t be further panic out there.

RUSH: By the way, I should tell you that Kanjorski’s source for this is none other than Bernanke — Ben Bernanke, the Federal Reserve — and the Treasury secretary, Hank Paulson. They are the two figures that told members of Congress what was going on with this initial run of $550 billion, an electronic run on the banks, money market accounts, investor accounts here. He goes on to say this, if they had not stepped in to stop this, if they had not closed the window...

KANJORSKI: If they had not done that, their estimation was that by two o’clock that afternoon, $5-1/2 trillion dollars would have been drawn out of the money market system of the United States, would have collapsed the entire economy of the United States, and within 24 hours the world economy would have collapsed. It would have been the end of our economic system and our political system as we know it. We’re really no better off today than we were three months because we had a decrease in the equity positions of banks because other assets are going sour by the moment.

RUSH: So the last part, I think that’s just salesmanship for doing something now to get the stimulus bill passed, although Kanjorski is among some Democrats starting to shift to the cant that more time is needed to make a correct decision this time; which I think is one of the reasons Geithner postponed his announcement to today from last week or even today. So, you know, I have been suspicious of all this that happened last fall. It just seemed too perfectly timed. Now we know that these are not individual money market accounts like you would have had to withdraw your money. This is money invested in a mutual fund money market account. So it is quite possible somebody could have started a run on this thing and the word spread, and it did — and the $550 billion withdrawal in one hour would panic anybody. So there’s so much to this. You know, it’s always the case that there’s so much more going on in all this that we don’t know. The Drive-By Media, any longer, is worthless in ferreting out the truth involved in events. They totally exist on the surface. They exist with a path of least resistance particularly with Democrats in power, because with the presumption that Democrats could abuse power or commit ethics violations just doesn’t even cross the radar. It doesn’t even show up on the radar. It’s not possible for Democrats to behave in that fashion, and so all this stuff goes on below the surface and we find out about it much later after the fact.

---

Deeper look:

The Timeline Project / Link List of Bailout History
http://www.freerepublic.com/focus/f-bloggers/2093845/posts

[Toddsterpatriot]

Have you seen any proof of this run, besides the story Kanjorski tells?

[1rudeboy]

What makes you think I’m whining about anything? I called someone “stupid” and it offended your delicate sensibilities. When I pointed-out that it was in response to a personal attack, you went into menopause.

[Scotswife]

“This is a huge opening the GOP could take advantage of, but sadly they are too enamored of the Libertarian view”

Is it the libertarian thing?

My guess would be - with all the dollars flowing between the Fannie/Freddie mess and the derivatives fraud - everyone in DC is bought and paid for by somebody.

[parsifal]

That too. Maybe I am too quick to see the Libertarian influence sometimes, but you just can’t seem to listen to a Republican nowadays without the Ayn Rand pouring out of them. I don’t think most of them realize what they’re saying.

parsy, who watched some of Rubin on TV today

[Arthur Wildfire! March]

I know of confirmation from memory. I need an older PC with a better search program. This lousy PC is “new and improved” and doesn’t even have a good word hunt.

Vague memory alert: I think it was Paulson who told someone on CNN that that a frenzy of electronic withdrawals in just a one hour period is what brought GW Bush to call for bailout. OK, I’m bringing more meltdown links.

We should never have made ourselves that vulnearable regardless. We need to unleash free market forces and become vibrant again.

[Arthur Wildfire! March]

“A $550 BILLION ELECTRONIC RUN ON THE BANKS”
http://www.freerepublic.com/focus/f-news/2183367/posts
On Thursday Sept 15, 2008 at roughly 11 AM The Federal Reserve noticed a ....

Hm ... ?
9/11/2008 CATASTROPHIC FINANCIAL TERRORIST ATTACK CAUSED
ECONOMIC MELTDOWN
http://www.freerepublic.com/focus/bloggers/2184661/posts

2008 Market Crash Should be Investigated [Canada Free Press]
http://www.canadafreepress.com/index.php/article/21772
2008 Market Crash Should be Investigated, George Soros, Open Society, Shadow Party. ... On Thursday, an electronic run on the banks occurred. ...

2008 Market Crash Should be Investigated | RedState
http://www.redstate.com/jplukens/2010/04/07/2008-market-crash-should-be-investigated/
Apr 7, 2010 ... On Thursday, an electronic run on the banks occurred. ... Triggering a crash in 2008 would also serve his political investments. ...

[Arthur Wildfire! March]

Rep Paul Kanjorski does seem to be a prime source:

YouTube - Glen Beck Feb.11 2009 ONE | Septmber, 2009
http://www.youtube.com/watch?v=2r8AKDp_0ek
Financial ...Rep Paul Kanjorski: 11 Sep 2008 Electronic Run On the Banks Added to. Quicklist1:24 ... Tom Woods on Glenn Beck “Meltdown” 02/09/2009. 40976 views ...