I just about fell out of my seat this morning watching Larry Summers on Bloomberg this morning. Here’s the guy who in collusion with Robert Rubin and then-Fed Chairman Alan Greenspan gutted the Commodities Futures Trading Commission by firing Brooksley Born in 1999. Brooksley, a high achieving attorney who became CFTC Chairman in 1996 was dismayed at the growth of non-regulated derivatives “dark pools” – so-called because the transactions were private and not subject to regulatory scrutiny – and viewed them as a potential threat to the stability of the world financial system.
She oversaw the authorship of “concept release” that was geared toward establishing CFTC regulatory reporting rules for all the players in the Over-the-Counter derivatives market after Proctor and Gamble lost $192 million to Bankers Trust after it participated in a complex derivatives trade. Proctor and Gamble and another Bankers Trust client, Gibson Greetings, both sued Bankers Trust. It was then further weakened after defrauding the state of New York, and was finally acquired by Deutsche Bank who essentially bought it for a song for its rolodex.
Deputy Treasury Secretary Larry Summers very disrespectfully demanded Brooksley Born withdraw the concept release, and when she refused, set out to publicly humiliate her by enlisting the support of Treasury Secretary Robert Rubin and Edward Greenspan, along with then SEC chairman Arthur Leavitt, to disavow approval of her competence and authority in producing such rules.
She resigned.
Shortly afterwards, in 1998, Long Term Capital Management (LTCM) needed to be bailed out by the Federal Reserve Bank in New York after it leveraged $4 billion into $1.2 trillion in derivatives exposure bets that went sideways – exactly the kind of outcome Brooksley Born was worried about in 1997.
The Gall of Larry Summers
So now to have Larry up there on his podium, where he very condescendingly squawks out some over-simplistic rubbish about how the economy is at risk thanks to the ultra-low interest rates that the Fed is forced to maintain in the wake of the 2008 economic train wreck that is a direct outcome of Larry Summers et al’s arrogance and outright stupidity in stifling the efforts of Brooksley Born, is the epitome of gall.
Far from giving voice to such a highly placed and dangerous hypocrite, Bloomberg should spend some time connecting the dots between the various acts of government stupidity and collusion among the U.S. Treasury Department, the Federal Reserve, and the financial services sector to demonstrate the ongoing criminal nature of those relationships and outlining how they will continue to generate extreme economic risk to taxpayers if left to continue unchecked.
Now that would be unbiased financial journalism. Just sayin’.
