Sunday, January 30, 2011

Here’s Why The Financial Crisis Could Not Have Been Prevented

by Robert Lenzner

The multi-trillion dollar meltdown of financial markets in 2007-09 could not have been prevented.  It was absurd speculation on the part of the special Presidential Commission to even suggest this impossible nirvana. No way Jose!
Let me tell you why. As my esteemed friend Jim Stone, chairman of Plymouth Rock  Assurance, headquartered in Boston puts it so succinctly; “We have wagered our place in history on our relative strength in finance. Bad bet.”
The  financial markets crisis  could not have been prevented because Alan Greenspan, chairman of the Federal Reserve Bank,  for 18 long years the power center in the nation for monetary  policy, did not believe in reining in the animal spirits on Wall Street. He chose to ignore pleading from wise titans like Loews Corp. Laurence Tisch, and Wall Street great John Whitehead, who begged him to turn off the spigot of easy money and rock-bottom interest rates.
Yeah, it could have been prevented if Greenspan had actually  taken steps to dampen down “irrational exuberance,” his description of the craziness that began in the mid-1990s– and continued to accelerate until mid-2007. Regrettably, Greenspan’s utter and naive  faith in free market ideology, makes him look a fool– not the God-like figure we all created.
Yeah- this here “irrational exuberance” blinded Wall Street biggies like Citigroup, Lehman, Merrill Lynch, Baer Stearns,and others from employing the necessary risk controls required to remain in control of their  fortune. Risk control, they thought, what’s that in light of the money we foolishly think were making, when we’re losing.
Yeah, it could have been prevented if the Clinton administration led by Robert Rubin and Larry Summers had not blithely agreed to deep-six the discipline of the Glass-Steagall Act- which in 1933 wisely separated  the activities of the investment banks and the commercial banks– and had ensured  relative stability on Wall Street for over half a century. [..]

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