Brooksley Born, the one-time Chairman of the CFTC, warned repeatedly of the derivatives ticking time bomb. The first sign she had been right all along was in 1993 with Bankers Trust, which literally robbed Proctor & Gamble of hundreds of millions of dollars through investment transactions that were blatantly fraudulent. Alan Greenspan’s response was to say that ‘the government doesn’t regulate fraud.’
In 1998, again Brooksley Born’s warnings were proven prophetic when Long-Term Capital Management (LTCM) lost more than $4.5 billion in less than four months, threatening to destabilize the entire global economy. Despite grueling testimony on four separate occasions, presenting compelling evidence, the bankers and their lobbyists prevailed in keeping derivatives unregulated and allowing the fraud to continue. In fact, the only thing in which Brooksley’s testimony resulted was the CFTC being barred from any further attempts to regulate the non-transparent derivatives market.
It wasn’t until the financial collapse of 2008 that Alan Greenspan admitted that he had been wrong all along. The problem is that nothing has changed. Despite Greenspan’s admission, and hundreds more hours of testimony on the dangers of derivatives, the bankers and their lobbyists, and the current Federal Reserve, have successfully blocked all efforts to regulate the time bombs that not only still exist, but continue to this day to expand and proliferate. Nothing has changed from 1993, except the hidden problem grows bigger by the day.
This is one hour of video every American should watch…
Watch The Warning on PBS.