Thursday, November 13, 2008

A Cry In The Wilderness

I heard some talking head on TV the other day trying to excuse his underperformance by saying something like this:

“No one could have anticipated that things could have gotten this bad in the markets…. etc”

I’ve heard other people say this too, and it’s not really true. There were plenty of cautionary warnings from people concerned about excess leverage and debt, no transparency, and asset bubbles forming, but no one listened. Here are some of the individuals who have been harping on this for years.

Brooksley Born, became the chairwoman of the Commodity Futures Trading Commission in the mid 1990’s. She began to agitate for more regulation of OTC derivatives and cited four potential problem areas; a lack of transparency, excessive leverage, insufficient prudential controls, and the need for coordination and cooperation among international regulators.

She later talked about it in a interview with the Washington Lawyer in 2003. “I became concerned about it once I got to the commission and began to learn about the OTC market. The more I learned, the more I realized we didn’t know. I realized there was a tremendous potential danger to the markets in the United States and to the international economy.”

How did the financial establishment react? Not very well, as they somehow got Congress to prohibit the commission she ran from taking any action on OTC derivatives for six months.

This article was written by the Stock Market Prognosticator. If you enjoyed this article, please vote for it by clicking the Buzz Up! button below.

2 comments:

  1. Could it be Congress is the problem and not the solution?

    ReplyDelete
  2. Yes, you could make that argument. FNMA and FRE lobbying money protected them from more regulation as well.

    ReplyDelete

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