A Futile Bailout as Darkness Falls on America

[seemslikeadream]

http://www.counterpunch.org/roberts10062008.html


By PAUL CRAIG ROBERTS

America has become a pretty discouraging place. Americans, for the most part, will never know what happened to them, because they no longer have a free and responsible press. They have Big Brother’s press. For example, on September 28, 2008, a New York Times editorial blamed the current financial crisis on “antiregulation disciples of the Reagan Revolution.”

What utter nonsense. Every example of deregulation that the New York Times editorial provides is located in the Clinton Administration and the George W. Bush administration. I was a member of the Reagan administration. We most certainly did not deregulate the financial system.

The repeal of the Glass-Steagall Act, which separated commercial from investment banking, was the achievement of the Democratic Clinton Administration. It happened in 1999, over a decade after Reagan left office.

It was in 2000 that derivatives and credit default swaps were excluded from regulation.

The greatest mistake was made in 2004, the year that Reagan died. That year the current Secretary of the Treasury, Henry M. Paulson Jr, was head of the investment bank Goldman Sachs. In the spring of 2004, the investment banks, led by Paulson, met with the Securities and Exchange Commission. At this meeting with the New Deal regulatory agency tasked with regulating the US financial system, Paulson convinced the SEC Commissioners to exempt the investment banks from maintaining reserves to cover losses on investments. The exemption granted by the SEC allowed the investment banks to leverage financial instruments beyond any bounds of prudence.

In place of time-proven standards of prudence, computer models engineered by hot shots determined acceptable risk. As one result Bear Stearns, for example, pushed its leverage ratio to 33 to 1. For every one dollar in equity, the investment bank had $33 of debt!

[cliffordu]

1. I suppose the S&L thingy had no bearing as a precedent, either.

[whistle]

3. A democratic controlled U.S. Congress and White House could alter this

...whole financial collapse and change direction in the first 100 days after the inauguration. But Obama must see the light and not try to save this corrupt monetary system.

He and congress will have to agree to put that system into bankruptcy, scrap that system and throw those bastard parasitis speculators and gamblers out, replace it with a new Bretton Woods style fixed exchange rate system, sign free trade agreements with Russia, China, India and Brazil, establish long range infrastructure development projects for the next 30 to 50 years, implement those programs asap using the best economic minds in the world to use the rsourses we have and put this mass of nearly 3.0 billion people to productive work to feed and supply the world with what they need and stop these blood sucking wars!

[whistle]

2. I love that Monopoly card icon you displayed