The truth about naked swaps is that they're as sordid as they sound. To be clear: They're the costliest, riskiest form of gambling on earth. Only a few economic patricians can play: hedge funds, banks, pension funds, insurance companies and governments. But, as we learned the hard way in 2008, just about everyone, including the system itself, loses when they win.

Geithner told Congress that the government was "blindsided" last year by the explosive risk of the derivatives market, but can regulate it now. That's wrong on both counts. Everyone in Washington knew or should have known the risks in 2000, when the government stopped regarding these complicated bets as felonies and started calling them "investments." Then, as now, the main argument was that if American markets won't clear such swaps, someone else will. But two wrongs don't make a right; nor do a trillion.

Washington's soft-core approach to the epic financial fraud that caused the crash remains hard to understand. As Bill Black says: "When you don't prosecute, things don't get better."

U.S. Treasury Secretary Tim Geithner had a front-row seat to the recent financial meltdown at his post as New York Fed chairman. Critics complain that he fiddled while Wall Street
imploded and question whether he has the will to hold the culprits in the financial collapse accountable now.
AFP PHOTO/Carl de Souza
U.S. Treasury Secretary Tim Geithner had a front-row seat to the recent financial meltdown at his post as New York Fed chairman. Critics complain that he fiddled while Wall Street imploded and question whether he has the will to hold the culprits in the financial collapse accountable now.
President Obama ran on promises to make the financial regulatory system more transparent, but his record so far has been much the same as his predecessors.
White House Official Photographer/WENN.com
President Obama ran on promises to make the financial regulatory system more transparent, but his record so far has been much the same as his predecessors.

They're not getting better or safer. Credit is tight as a tick—especially for consumers. The financial industry is expanding its use of new and exceedingly complex derivatives. The mortgage market, the source of the raw material for mayhem, remains unchecked. The FBI said this summer that mortgage fraud is "rampant" and growing. Suspicious-activity reports (known as SARS) rose from 47,000 in fiscal 2007 to 63,000 in fiscal 2008, which ended last September at the height of the crisis and its publicity, and now such reports are on schedule to exceed 70,000 for fiscal 2009. A growing source of exploitation involves reverse mortgages marketed to the elderly.

People want justice. They've lost savings, homes (or the value of homes), jobs and retirements. Foreclosures continue to rise. People can't believe that the mega-grifters who pulled off mortgage, securitization and derivative frauds walk the streets with lined pockets. And the venal "experts" who issued bogus ratings that deodorized subprime cesspools should be in the dock. But it almost seems as if Bernie Madoff's 150-year sentence for a scheme that had nothing to do with causing Wall Street's meltdown is supposed to cover all the crooks, and that we're supposed to be satisfied.

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