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Former Treasury Secretary says banks may be riskier now than in the 2008 crisis

Former Treasury Secretary says banks may be riskier now than in the 2008 crisis

“Sir. SIR! This your bag,” the TSA agent barked at me last week, more as a statement than a question.

“It is.”

“Are you carrying any liquids?”

I knew immediately; I had forgotten about the bottle of water that I had shoved in my briefcase before checking out of my hotel.

They opened my bag and confiscated the water bottle immediately with an extra harrumph to make sure I knew that I had wasted their time.

Yeah, I get it. I broke the rule. But it’s such a ridiculous rule to begin with.

Are we really supposed to pretend that Miami International Airport is any safer because there’s a brand new, unopened Dasani bottle in the TSA wastebin?

You may recall how Istanbul’s Ataturk Airport was attacked on June 28th by men armed with automatic weapons and explosives.

Ataturk was already one of the most security-conscious airports in the world– you actually have to go through a security checkpoint just to enter the building, followed by a second security checkpoint on your way to the gate.

And yet, despite all of this extra security, 41 people were killed and hundreds more wounded in an attack that shows just how ineffective airport security really is.

Airport security isn’t real security. It’s merely the illusion of security– a bunch of busybodies in uniforms enforcing pointless rules to make people believe that they’re safer.

Candidly, our financial system has borrowed the same principle. There’s no real safety in our financial system– merely the illusion of safety.

Leading up to the 2008 financial crisis, most people thought the banks were safe.

After all, we’ve been told our entire lives that the banks are rock solid. What could go wrong?

…click on the above link to read the rest of the article…

Betting on the Wall Street Crash

Betting on the Wall Street Crash


If you read Michael Lewis’s book The Big Short or see the movie by the same name, you won’t find much about how the financial crisis of 2008 was set in motion more than two decades earlier. You won’t learn much about the roles of Ronald Reagan and his disdain for big government or about Bill Clinton’s faith in neo-liberalism, trusting that the modern markets and the supposedly sophisticated investors would keep excesses in check.

Nor will you find much about economist-turned-politician Phil Gramm who incorporated many of Reagan’s and Clinton’s beliefs into legislative actions, slashing taxes on the rich in the 1980s (and thus incentivizing greed) and, in the 1990s, brushing aside Franklin Roosevelt’s painfully learned lessons from the Great Depression about the need for firewalls between the speculation of Wall Street and the hard-earned savings of Main Street.

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Also out of Lewis’s narrative frame is Brooksley Born, the federal commodities regulator who foresaw the looming danger from the exotic new financial instruments that sliced and diced risky subprime mortgages and packaged them in bonds with ratings far above what they deserved – and the even riskier tendency to lay bets on how the bonds would perform.

But Born was out-muscled by bigger financial stars with larger egos, the esteemed Federal Reserve Chairman Alan Greenspan (originally a Reagan appointee) and Clinton’s brash Deputy Treasury Secretary Lawrence Summers, a rising star in the neo-liberal establishment which treated the market’s “invisible hand” as a new-age god.

…click on the above link to read the rest of the article…

Olduvai IV: Courage
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Olduvai II: Exodus
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