“In 2005, economic cheerleaders dominated the airwaves. Times were good. Alan Greenspan ruled the economy.”
So begins “The Warning”, which it appears Republican leaders have yet to heed. This PBS documentary is sharing what may be a little known, but highly important footnote in American history.
Even though the American people rank banks among the least trusted institutions, Republicans are currently fighting to dilute the very regulations put in place to control them.
They are also continuing a procedural blockade that has prevented President Obama from putting Elizabeth Warren or anyone else in charge of the Consumer Financial Protection Bureau, which opens its doors in two weeks.
For decades, Alan Greenspan, aka “The Wizard”, had been considered “one of the most admired and influential economists in our nation’s history”, declared President Bush while bestowing upon him the nation’s highest civilian honor, the Presidential Medal of Freedom.
“Alan was a great wizard. No one understood what he said, but he said it in such a way that everybody bought it,” said Arthur Levitt, SEC Chairman from 1993-2001. “Everybody hung on every word.”
“Very few people wanted to take him on and challenge him because he knew so much more than they did and if he didn’t, he certainly appeared to,” said Levitt.
Greenspan, a disciple of Libertarian philosopher Ayn Rand, believes government is a destructive force that gets in the way. Rand was opposed to all forms of control believing in a free and unregulated economy. In her own words she said, “I am for the separation of state and economics.” In other words, Rand and Greenspan believe that those who do well will prosper and those who don’t must suffer the consequences of their inaction or bad luck.
Many presidents bought into this philosophy, in particular Ronald Reagan who espoused, “Government is not the solution to our problem, government is the problem.”
In 1987, Reagan made Greenspan Chairman of the Federal Reserve, effectively making him the most powerful banker in the world. Somehow Greenspan got past his distaste for interfering in the marketplace, which is what the Federal Reserve does, and accepted the position.
Clinton and other Democrats would continue to support this flawed “free market” premise allowing these true believers of “the less regulation the better” to invade the Treasury and the White House, including Robert Reubin, Treasury Secretary (formerly head of Goldman Sachs), and Harvard economist, Lawrence “Larry” Summers. Greenspan, Reubin and Summers make up, what I like to call, the Unholy Trinity. (Oh and by the way, Timothy Geitner, former President of the Federal Reserve Bank of New York and current US Secretary of the Treasury, was at the time a protégé of Reuben’s. So although some of the players have changed, the game remains the same.)
“Washington’s hands off attitude toward Wall Street seemed to be paying off,” says PBS narrator Jim Gilmore.
And it was paying off for the many bankers on Wall Street who benefited from the very system they helped to rig, with the Unholy Trinity constantly looking the other way.
Long before the economic meltdown, however, Brooksley Born tried to sound the alarm… and no one listened.
In 1996 Born, a Securities lawyer whose practice was in the area of derivatives was head of the Commodities Futures Trading Commission (CFTC), an agency seen as a “small fish in a big pond”. The CFTC looked at the bull market with much skepticism.
“We are trying to protect the money of the American public”, said Born of her agency.
For her efforts she was labeled as “irascible, difficult, stubborn and unreasonable”. Her attempts to warn the Unholy Trinity and Congress made her the enemy of a large number of highly influential people including one of the most powerful men in the world…Alan Greenspan.
Nearly 10 years before the economy tanked, the Unholy Trinity, with Congress’ blessing, was able to discredit Born and the American people never fully understood how much danger the economy was in.
Recently, Greenspan finally acknowledged that all these years he has been basing his economic philosophy on a principle that is to say the very least, unsound. The Master of the Universe looked to be a broken man wracked with guilt at having gambled away America’s promise and the future of so many.
Yet, here we are again, with the Republicans looking out for the interests of Wall Street (and Corporate America) instead of Main Street. I guess they won’t be satisfied until, like the good citizens of Greece, we are rioting in the streets. And believe me, if Republicans are allowed to gain the Presidency and the Senate that is exactly where the rest of us who haven’t already lost our homes will end up…in the streets.
Check out a video here.
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