The Warning

Bill Clinton

By Jim Carey

This is a story about a woman and a betrayal by President Bill Clinton which eventually led to the 2008 economic collapse.

Occupy SMA Meeting and Film
The Warning
Mon, May 16, 1pm
Quinta Loreto Hotel
Loreto 15
No charge

Front and center is Brooksley Born, first in her class, first female editor of the Stanford Law Review, who speaks now about her failed campaign during Bill Clinton’s administration to regulate the secretive, multi-trillion dollar derivatives market; its crash helped trigger the 2008 meltdown.

Then former SEC Chairman Arthur Levitt, a member of President Clinton’s powerful Working Group on Financial Markets, is told by Alan Greenspan and Robert Rubin that “Born is irascible, difficult, stubborn, and unreasonable.” They convince Levitt that Born’s attempt to regulate the risky derivatives market could lead to financial turmoil, a conclusion he now believes was “clearly a mistake.”

Larry Summers told Born, “You’re going to cause the worst financial crisis since the end of World War II …stop, right away. No more.” Greenspan, Rubin, and Summers ultimately prevailed. Greenspan, the maestro, and both parties in Washington were united in a belief that the markets would take care of themselves. The Obama administration continues the charade. They continue to roll the dice.

In June 1998, the face/notional value of all global OTC derivatives was $70 trillion. The figure skyrocketed nearly tenfold to $684 trillion by June 2008 (source: Bank for International Settlements). This figure has continued to rise, reaching $691 trillion by 2014. Now the OTC derivatives comprise roughly 90 percent of the total market, which includes exchange-traded derivatives, such as futures and options contracts. The gross market value, in contrast, is the total amount paid by companies for outstanding contracts. It decreased from $20.9 trillion to $15.5 trillion between end December 2014 and end June 2015. In 2008, the taxpayers bailed out the banks. The cost to the world economy was $14 trillion. Under the new rules, we are told that the depositors will bear the brunt of the next crash.

The Warning gives us a glimpse into the complicated politics that led to the last economic crisis. It’s a riveting story which would awaken all taxpayers if they really knew what is happening in the DC/Wall Street gambling house.

Born gets the last word: “It’ll happen again if we don’t take the appropriate steps. There will be significant financial downturns and disasters attributed to this regulatory gap over and over until we learn from experience.” The movie is free and will be followed by a discussion.

 

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