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I know that the title of the blog will invite people to label me as an advocate for big government and other choice words but in a series of blogs I'm going to try to share what I have learned to be the causes of the September 2008 financial crisis. The book “Too Big to Fail” by Andrew Ross Sorkin, details the perfect storm of events that led to the financial crisis, by faulting the Fed, unworthy borrowers and lenders, the risky under leveraged financial schemes of Wall Street that were pawned off and the bond rating firms that allowed the schemes to continue by giving AAA ratings to owners of the toxic assets. I purposely left off the blame and role of the Federal government in the first paragraph because I will go into more detail later in this blog and in future blogs.

Much to the chagrin of the free market fundamentalist and those that subscribe to the polarizing politics of Rush Limbaugh and others, Barney Frank, Chris Dodd, Frank Raines, and President Clinton didn't really play a major role in this crisis. Anyone that thinks that four men could bring down the world financially ,is a likely candidate for that Guadalupe River bridge I have been trying to sell for years. I know all about the fable that would have people believe that the Federal government forced the unworthy borrowers onto the unwilling, above reproach, mortgage firms and banks. The taxpayers bailed out that the banks and the Obama Administration is trying to put pressure the banks make loans but there are unyielding, so they do know how to say no to the federal government. Other than getting a favorable loan from Countrywide Mortgage, Christopher Dodd did not have a major role; Frank Raines was a just one of many incompetent, crooked, managers of Freddie and Fannie. President Clinton like many before him had a minor role but was a willing participant. Barney Frank (like many others) didn't think we had a serious housing problem but he was just one man, 534 other legislators had the votes to override his decision or opinion.

This all started with a mindset that thinks the market will correct itself and should not be regulated, taxed, unionized or questioned. Ronald Reagan started the era of deregulation and for the past 30 years free market fundamentalist have tried to convince us that the success of the financial sector should be measured not how it will provide services to the consumers and corporations but how much money it makes for itself. Alan Greenspan used to think that the government should not try to regulate fraud. In a congressional hearing last year, Mr. Greenspan did a complete turnaround. Alan Greenspan used to be a disciple of Ayn Rand, a believer of Laissez-faire (the market can do no wrong), she believed in a complete separation of state and economics. “Those that do well will prosper, those that do not, will fail.”

The over- the- counter(OTC) derivatives came to light in the spring of 1998 when a lawsuit by Procter Gamble against Bankers Trust, caught the attention of the head of the Commodity Futures Trading Commission, Brooksly Born. For some reason this obscure department had the legal authority to regulate derivatives. Ms. Born started to make a little noise about regulating the derivatives, but she soon got the full wrath of the secretive panel called the President's Working Group. The members of that group were SEC chairman, Arthur Levitt, Treasury Secretary, Robert Rubin, Larry Summers and Fed Chairman Alan Greenspan. To make a long story short, with the blessing of President Clinton, they convinced Congress to strip the existing powers the CFTC had over the derivatives market. Brooksly Born resigned shortly after that. She never really stood a chance because 13 major bank executives were pressuring the administration, eventually convincing them that without these schemes the good times would come to an abrupt halt. Currently there are five financial lobbyists for every congressman.

Imposing a fee or a tax on the banks, and restricting CEO pay, is like putting a band aid on a 6 inch open one wound, the patient will eventually die. The banks need a simple piece of legislation that restricts banks from becoming an investment firm. Bank should not be able to gamble with Aunt Martha's deposit. Reinstate ,Glass-Steagall, or we will have another financial crisis because Wall Street is back to their old tricks.If congress imposes too many regulations,the lobbyist will just find more loopholes..Keep it simple.

I will write several installments because of the complexity of this world economic crisis. One simple blog will not tell the whole story, like the closeness between Hank Paulson (former Treasury Secretary) and Wall Street, a practice continued today by Timothy Geithner and Larry Summers. The book details the way Goldman Sachs became a bank to get the favorable interest rates but did not have to do the consumer lending. It was like (still is) the government and Wall Street playing poker with the taxpayer’s money.