Skip to main content

"The Committee to [Screw] the World"

In 1999, Alan Greenspan (Chairman of the Federal Reserve), Robert Rubin (Treasury Secretary for the Clinton Administration) and Lawrence Summers (Rubin's deputy secretary) were dubbed on Time Magazine's front cover as "The Committee to Save the World". Ironically, just a year before that, the trio made a decision that should have earned them the moniker "The Committee to SCREW the World"

In 1998, Brooksley Born, chairwoman of the Commodity Futures Trading Commission, began to notice the rise of a new economic instrument called the "derivative". A derivative is "a financial instrument which derives its value from the value of underlying entities".  Noticing their complexity and thus the greater likelihood that they could be used for high speculation and fraud, Born determined that her CFTC would begin regulating the use of derivatives.
Before the end of that day, Greenspan, Rubin and Arthur Levitt, then-chairman of the Securities and Exchange Commission, put out a statement saying they had “grave concerns about this action and its possible consequences” and they “seriously question the scope of the CFTC’s jurisdiction in this area.”
Greenspan, Summers, Levitt and Born testified at a congressional hearing in July of that year, with the three men warning that the CFTC proposal could hurt financial markets and put the legality of existing derivatives contracts in doubt.
In 2000, Congress passed the Commodity Futures Modernization Act.  In the new law, derivatives were specifically prohibited from being regulated.  This mistake was a major contributor to the 2008 crash of the US and world economies.

Bloomberg writes that
The global OTC derivatives market mushroomed to a notional value of almost $600 trillion in 2007 from about $28 trillion at the time of Born’s proposal. [this ballooning of derivatives] include[d] the toxic instruments that ravaged AIG and Lehman Brothers. Those decisions helped set the stage for the worst global recession since World War II, with aftershocks that are still being felt from Washington to Athens.
We're still feeling it. We got screwed. And none of the Committee to Screw the World ever went to jail.

Comments

Post a Comment

Thank you for commenting. If you have a Google/Blogger account, to be apprised of ongoing comment activity on this article, please click the "Subscribe" link below.

Popular posts from this blog

Red Clothing and Resurrection: Jesus Christ's Second Coming

The scriptures teach that when Christ comes again to the earth, that he will be wearing red apparel. Why red ? They also teach that at Christ's coming, many of the dead will become resurrected. Will this only include members of the Church of Jesus Christ of Latter-day Saints? Not by a long shot, no matter what some Mormon might tell you.
2 comments
Read more

School Vouchers: "The Bramble Memo"

$429 million? What? Where? The legislative fiscal analyst for the State of Utah calculated the costs to the public schools over the next 13 years if school vouchers are implemented. It said the costs would be $5.5M in the first year, and $71M in the 13th year. Suddenly, the number I have started seeing thrown around was $429 million, the total costs for vouchers over 13 years. Where did that number come from? Enter the mysterious "Bramble Memo". In the past few days several of us (Jeremy, Utah Taxpayer, Craig, Sara, Urban Koda, Jesse, and me) have (sometimes?) enjoyed a lively discussion about school vouchers in Utah . Jeremy clarified to me the costs of the venture by linking to a copy of the Utah Legislative Fiscal Analyst's Impartial Analysis (LFA) of the costs of Vouchers , found on "The Senate Site". In my previous voucher article, I quoted some of Lavar Webb's article from last Sunday's Deseret News, wherein he stated that those total costs ...
66 comments
Read more

What's Your Reaction to California's Decision on Same-Sex Marriage?

Yesterday a "Republican-dominated" California Supreme Court struck down state laws against same-sex marriages. The LDS Church issued a press release, calling the decision "unfortunate". I agree, but not for reasons you might think. Did the California Court make the right decision? Update 5/17/2008 : California decision does not affect prohibitions against polygamy and marriage of close relatives. Why not? Government should not sanction same-sex marriages for the same reason that it should not sanction heterosexual adultery--such activities tend to be destructive to the family as the fundamental unit of society. Before you get too far into reading into my words, let me echo and agree with something that Madeleine Albright wrote in her recent book, The Mighty & The Almighty (one of the better books that I have read in a long time): I oppose discrimination against gays and lesbians and am convinced that heterosexual adultery is a greater danger to the institu...
67 comments
Read more