Arkansas Republican Senator Tom Cotton blaming Biden for the collapse of Silicon Valley Bank and Signature Bank (the third largest bank failure in our history!) is a case of the pot calling the kettle black. Biden has ruined the entire economy but the cancerous cause of our financial failures is a direct result of both Parties in Congress colluding with the financial industry. This is the conclusion from The Financial Crisis Inquiry Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States (Authorized Edition) dated January 2011.
It’s the reason members of Congress leave office as multi-millionaires.
This conclusion released to the public -in true feckless committee fashion- was a whitewash of the facts contained within. But the causative “smoking gun” evidence can easily be found within the publication if one takes the time to read it. Congress bets on the premise no citizen will take that time. If they did Congress would be tarred and feathered and run out of D.C. on a fence rail.
For a well-documented history of our federal financial fiasco read The Great Deformation: The Corruption of Capitalism by President Reagan’s Budget Officer, David A. Stockman, 2013; 712 pgs. (especially Notes on Sources page 713).
Stockman calls the Congress / Fed / Wall Street incestuous relationship a “Gambling Casino in a Whorehouse”. Truer words were never spoken.
Another equally well documented expose’ of congressional financial corruption is The Creature from Jekyll Island: A Second Look at the Federal Reserve by G. Edward Griffin, 5th Edition dtd September 2010; 588 pgs.
Efforts to reform financial corruption have been consistently resisted by members of both Parties in Congress:
“Brooksley Born, a Democrat appointed by President Clinton, was chair of the Commodity Futures Trading Commission (CFTC) from August 26, 1996 to June 1, 1999. Due to litigation against Bankers Trust Company by Proctor and Gamble, Born sought comments on the regulation of over-the-counter derivatives, a first step in the writing of CFTC regulations. Born was particularly concerned about swaps, financial instruments traded over the counter between banks, insurance companies and other funds and companies thus having no transparency except to the two counterparties and the counter parties’ regulators – if any.
Born’s efforts were strenuously opposed by Federal Reserve chairman Alan Greenspan and by Treasury Secretaries Robert Rubin (who also opposed funding the “Atlanta Plan” defending critical targets against terrorist attacks by aircraft) and Lawrence Summers. She was also opposed by SEC chairman Arthur Levitt [all Republican appointees]. They argued the imposition of regulations on derivatives would “stifle innovation” in the financial market. In 1998, a trillion dollar hedge fund called Long Term Capital Management (LTCM) was near collapse. Using mathematical models to calculate debt risk, LTCM used derivatives to leverage $5 billion into more than $1 trillion, doing business with fifteen of Wall Street’s largest financial institutions. The derivative transactions were not regulated, nor were investors able to evaluate LTCM’s exposures. Born stated “I thought LTCM was exactly what I had been worried about.” In the last weekend of September 1998, the President’s working group was told that the entire American economy hung in the balance.
After intervention by the Federal Reserve (tax payer’s money bailout) the crisis was averted. In congressional hearings into the crisis, Greenspan acknowledged that language had been introduced into an agriculture bill (by Congress) that would prevent CFTC from regulating the derivatives which were at the center of the crisis that threatened the U.S. economy. U.S. Representative Maurice Hinchley asked “How many more failures do you think we’d have to have before some regulation in this area might be appropriate?” In response, Greenspan brushed aside the substance of Born’s warnings by asserting “the degree of regulation of the OTC derivative market is “quite adequate to maintain stability.” Greenspan didn’t believe fraud was something that needed enforcement. Under heavy pressure from the financial lobby (Wall Street), legislation by Congress prohibiting regulation of derivatives by Born’s agency was passed by Congress.
Born resigned on June 1, 1999.
The derivatives market continued to grow yearly throughout both terms of George W. Bush’s administration. On September 15, 2008, the bankruptcy of Lehman Brothers forced a broad recognition of a financial crisis in both the U.S. and world capital markets. As Lehman Brothers’ failure reduced financial capital’s confidence, a number of journalistic sources suggested the failure was caused by Congress’ forbidding regulation of the derivatives market.
An October 2009 Frontline documentary titled “The Warning” described Born’s thwarted efforts to regulate and bring transparency to the derivatives market – and continuing opposition thereto. Born concluded the interview sounding another warning: “I think we will have continuing danger from these markets and that we will have repeats of the [2008] financial crisis – may differ in details but there will be significant financial downturns and disasters attributed to [Congress’ failure to regulate derivatives] over, and over, until we learn from experience.” – Wikipedia
Two years after passing financial reform legislation, Congress quietly passed legislation negating all previously passed financial reform legislation. This set the wheels in motion for the warnings of Brooksley Born to be fulfilled.
Silicon Valley and Signature Bank are just the tip of the iceberg. And America’s financial Titanic is sailing at full speed in the floe.
“Plato and Aristotle wrote about politics as if to lay down rules for a madhouse. They pretended to treat it as something really important because they knew the madmen believed themselves to be kings and emperors. They humored their beliefs in order to calm down their madness with as little harm [to society] as possible.” – Blaise Pascal, Pensees, 1711.
