I am a huge fan of the PBS show Frontline and the one that came out only a couple of weeks ago that’s previewed below was excellent. You can go to www.pbs.org and underneath frontline programs click on “The Warning October 20, 2009” to watch it in it’s entirety. I highly recommend it.
The basis of the show is about how Alan Greenspan who for so many years controlled the Federal Reserve was in favor of “laissez faire” government and how his perspective worked nicely into Ronald Reagan’s theme that “too much government was the problem”. Greenspan took it a step further in thinking “that government is a destructive force that gets in the way of Wall Street”.
The hero in the story is a woman named Brooksley Born who was the chairwoman for the CFTC – Commodity Futures Trading Commission, who believed in government regulation and combating fraud. She warned the Congress and the President of the need to regulate financial instruments known as derivatives. She was smart enough to foresee the need to make these markets more transparent whereas Mr Greenspan favored the approach of “letting the market figure it out”. Ofcourse no one listened to Ms Born and she was made out to be the enemy.
In my opinion the basic failure of having government doing their job as watchdog has lead to the tremendous loss of wealth, loss of jobs and loss of homes we are experiencing right now. I was glad to see that two of the big players in this story have learned their lesson, Larry Summers is now in favor of regulation of derivatives. Arthur Levitt wished he had known Ms Born better and had put more trust in her as opposed to listening to others.
I hope we don’t squander the opportunity to pass financial reform legislation soon or we will be experiencing more of the same in the future. As they always say the drivers of capitialism are two words “greed” and “fear”.