UNCHANGED! 10/22/09

It seems as if nothing is going to change. Save for a few symbolic sacrificial lambs, all the players who exploited the deregulated secretive derivative market and inevitably caused the present financial crisis are still in power. President Obama has Larry Summers and Tim Geithner as his financial advisors. They with Federal Reserve Chairman Alan Greenspan, Treasury Secretary Robert Rubin and Head of the Securities and Exchange Commission, Author Levitt, were members of the Working Group, all pro business and anti regulation. They had not only refused to listen to the warnings of Brooksley Born, Chairperson of the Commodity Futures Trading Commission [CFTC], on the dangers of how the financial industry was dealing with derivatives, but lobbied congress to neuter her watchdog federal agency and sever her from any power to inform the public at large of what the financial industry was doing. Rendered impotent, she resigned in 1999. Her discoveries and her warnings, as far back as 1996, subsequently proved to be prophecy and became horrifically true in 2008.

Robert Rubin became the temporary Chairman of Citigroup at the end of 2007. Citigroup, received one hundred million dollars of TARP money to help bail it out of its financial trouble. Rubin subsequently resigned January 2009 after being criticized for his performance. None-the-less, during the eight years he had previously served as board member and senior executive at Citigroup, he received one hundred and twenty-six million dollars in cash and stocks. He was the invincible titan when the times were good. He is now considered the man who led Citigroup to its ruin.

Alan Greenspan retired one year before the financial meltdown and has now admitted his philosophical model, which he used for forty years, was wrong. The wreckage from his misguided view that “the Market can regulate itself,” remains.

What is more stunning is the fact that no regulations to prevent this from happening again have been put into place. Ms. Born was not asked to advise the President, in spite of all her expertise and insight to the cause of the problem. Bailed out banks are paying back government loans so not to have to answer to their regulatory demands. Wall Street is boasting the Dow Jones Industrial Average is back up to ten thousand. But lending is still stagnant, housing foreclosures are happening every six seconds, and these banks, now larger than ever, are leveraging smaller banks who cannot complete with these “not allowed to fail” Goliaths.

We’re still not “out of the woods.” If we use the Depression as a model, in 1929 the markets crashed. But it wasn’t until 1931-32 that the Depression fully engulfed us. Roosevelt wasn’t to come into office until November of ’32. And, we didn’t fully come out of the Depression until the end of the second world war, 1945.

If history does repeat itself, the “tsunami” is still coming, maybe by 2010-11. It’s a scary thought, especially when all this money to shore up the system has already been spent to stop the collapse of the banks. Our economy is flat, not rejuvenating itself and there’s still the mortgage crisis.

Derivatives are still here. It’s only a matter of time before the whole ugly self-perpetuating greed process resumes; and yes, with it, the inevitable promise of another financial collapse. But this time, there will be no money to bail out the banking system and a total collapse will occur. Dead in the water, how long will it take to fix, rebuild shattered confidence, and completely change and restructure?

All during this paralysis, financial activity will be frozen; all global commerce will have ground to a halt. Without lending and a banking system, unemployment in this country will be anywhere from thirty to fifty percent, maybe worse. The hypothesis of the possible reactions to such a crisis seems that of science fiction. Judging by history, it could prove even more cataclysmic. Look at how global financial ruin and misbegotten fiscal policy led to World War II.

The health insurance industry has lobbied congress to death and serious healthcare reform seems highly unlikely. Without a public option, insurance companies are guaranteed even greater profits because of the planned mandate that everyone must have insurance or be fined.

Afghanistan is looking more like Vietnam with us poised to jump in and drown.

It’s a total nightmare. Those in positions of power, who are supposed to be representing our best interests, are not. And with all the players, these “experts,” who were ultimately responsible for this present crisis, it seems any average Joe on the street might have directed our financial system better. Certainly they would not have done any worse.

Remember the French Revolution? We may ultimately not be that far away.

10/22/09