No protection for consumers

From the moment derivatives took hold of the financial system, financial wizards in government and their Wall Street colleagues did everything they could to obscure the potential damage this trading could inflict on all of us.  Both parties -- no, really both parties -- are culpable.  The Clinton administration had Robert Rubin clamping down on any effort to expose the dangers of these investments.  And he was just one of many.  Larry Summers is another perp as was Alan Greenspan.  Brooksley Born, then head of the Commodity Futures Trading Commission -- a regulatory agency -- knew the dangers and tried to expose them.  She was shot down.

"I walk into Brooksley's office one day; the blood has drained from her face," says Michael Greenberger, a former top official at the CFTC who worked closely with Born. "She's hanging up the telephone; she says to me: 'That was [former Assistant Treasury Secretary] Larry Summers. He says, "You're going to cause the worst financial crisis since the end of World War II."... [He says he has] 13 bankers in his office who informed him of this. Stop, right away. No more.'"

Greenspan, Rubin and Summers ultimately prevailed on Congress to stop Born and limit future regulation of derivatives. "Born faced a formidable struggle pushing for regulation at a time when the stock market was booming," Kirk says. "Alan Greenspan was the maestro, and both parties in Washington were united in a belief that the markets would take care of themselves." ...Business Insider

That's a description of what took place during the Clinton era, a description of the first attempts to warn consumers about the coming crisis.  The situation didn't improve, of course, during the Bush administration.   The Financial Crisis Inquiry Commission hearings only add to the revelations.

The commission, a bipartisan Congressional panel, has been holding hearings on the origins of the financial crisis. D. Keith Johnson, a former president of Clayton Holdings, a company that analyzed mortgage pools for the Wall Street firms that sold them, told the commission on Thursday that almost half the mortgages Clayton sampled from the beginning of 2006 through June 2007 failed to meet crucial quality benchmarks that banks had promised to investors.

Yet, Clayton found, Wall Street was placing many of the troubled loans into bundles known as mortgage securities.

Mr. Johnson said he took this data to officials at Standard & Poor’s, Fitch Ratings and to the executive team at Moody’s Investors Service.

“We went to the ratings agencies and said, ‘Wouldn’t this information be great for you to have as you assign tranche levels of risk?’ ” Mr. Johnson testified last week. But none of the agencies took him up on his offer, he said, indicating that it was against their business interests to be too critical of Wall Street. ...NYT

I think what we all want to know is whether we are being protected now -- at least somewhat better than during the past fifteen years or more.  And I think we all know that the answer is "probably not." 

When Republicans hammer away at the climate of "uncertainty," they're not talking about small investors' uncertainty.  They want to make sure the "climate" is sunny for business.  They have little concern, if any, for investors still cleaning up after the storm and who find  that Congress is not about  to build sturdier protections against the next flood.