Crony Capitalism, Part 4

(11 am. – promoted by ek hornbeck)

In Part 4 of his continuing series about the causes of and possible fixes for the ongoing economic and banking crisis with Paul Jay of The Real News, Dr. Robert Johnson, Director of Financial Reform for the Roosevelt Institute, and Executive Director of the Institute for New Economic Thinking (INET) discusses his ideas of the main principles for the kind of legislation needed to remedy the situation.

Johnson notes that without fundamental changes in the way the Obama Administration is dealing with, and a new regulatory framework governing, the actions of investment banks on Wall Street and the forms of financial instruments like derivatives that they can create and sell, that another very serious economic crash, almost certainly worse than what we’ve seen so far, is a virtually certainty to occur, probably sooner than later, and that firms that are “too big to fail” must be allowed to fail.

Real News Network – January 2, 2010

The crash can happen again

Robert Johnson: Nothing in current financial reform legislation will stop another crash

You can watch all four parts of this interview under the tag Robert Johnson.

Johnson currently serves on the United Nations Commission of Experts on International Monetary Reform under the Chairmanship of Joseph Stiglitz. He is also the Director of Economic Policy for the Franklin and Eleanor Roosevelt Institute (FERI) in New York. Dr. Johnson was previously a managing director at Soros Fund Management where he managed a global currency, bond and equity portfolio specializing in emerging markets. Prior to that time, Dr. Johnson was a managing director of Bankers Trust Company managing a global currency fund. He also served as Chief Economist of the U.S. Senate Banking Committee under the leadership of Chairman William Proxmire (D. Wisconsin) and before that, he was Senior Economist of the U.S. Senate Budget Committee under the leadership of Chairman Pete Domenici (R. New Mexico).

And again, also see:

What Congress Did Not Want You to Read: Robert Johnson’s Testimony on OTC Derivative Market

Saturday, 11/7/2009, by Lynn Parramore at New Deal 2.0 (a project of the Roosevelt Institute)

Robert Johnson, Director of Financial Reform for the Roosevelt Institute, submitted his testimony in early October to the Committee on Financial Services as part of the hearing on reform of the over-the-counter derivatives market. Johnson’s hard-hitting analysis of the potentially catastrophic faults in our financial system runs counter to a troubling trend of failing to address risk that has plagued the Committee’s.

Johnson has grave concerns about loophole-riddled bill currently under review, describing it to me in a recent conversation as “Swiss Cheese.”  In his view, regulation of the “reckless” OTC derivatives market is crucial as its impact is so broad, forming “the very fabric of our financial system.”

There has been a disturbing trend of attempts to silence voices like Johnson’s.  His original in-person testimony before the Committee was shut down after an outrageous five minutes by Melissa Bean, while industry players spoke at length. Johnson was forced to submit his full testimony in written form, but my attempts to have it published on the House website were met with a number of implausible excuses by staffers. Ken Silverstein reported the story of what appeared to be deliberate suppression on the Harper’s Magazine website. Finally, amid a growing storm of outrage, the House added the testimony to its website.

Click here to read full text: Rob Johnson Testimony [.PDF]

*For further reading on the dangers of relying on clearinghouses to remedy credit default swaps, see “The Fantasy of the Clearing House Magic Bullet” on Naked Capitalism.

**And please send the link to the post to as many people as possible!


Skip to comment form

    • Edger on January 2, 2010 at 15:33

    • banger on January 2, 2010 at 16:01

    The events surrounding the financial crisis (which was predictable and was predicted) are not “economic” (not that there is such a thing as “economics”) but clearly political. Seizing money through acts of violence, intimidation or fraud and avoiding prosecution are political acts. It is the balance of power in this country that caused this to happen not some weirdness in “the market”. This crisis had very little to do with economic cycles or anything like that.

    This scheme started with the first major raid on the Treasure called the Savings and Loan “Scandal”. Where, basically, fraud was committed on a fairly large scale and the fraudsters largely got away with it.

    Progressives need to take responsibility for lacking not only the will but also the theoretical basis on which to act against this kind of fraud which now incudes (in my view) the whole GWOT scam.

  1. A $64 trillion hole was torn in the world’s economic system:

    All the world’s treasury printing presses can’t even print the money fast enough to redeem these ‘investments.’ There isn’t enough ink or paper!

    • RUKind on January 3, 2010 at 02:44

    With a paint ball rifle of course.

    Fuck them all!

Comments have been disabled.