If any three people are most responsible for the failure of financial regulation, they are Alan Greenspan, Larry Summers and Robert Rubin, says economist Robert Reich.
“I dislike singling out individuals for blame or praise in a political system as complex as that of the United States, but I worry the nation is not on the right economic road, and that these individuals — one of whom advises the president directly and the others who continue to exert substantial influence among policy makers — still don’t get it,” Reich writes in his blog.
In 1999 Reich notes, the three advised Congress to repeal the Glass-Steagall Act, which since 1933 had separated commercial from investment banking, even though the repeal had Wall Street “salivating … because it wanted to create financial supermarkets that could use commercial deposits to place bets in the financial casino” that would yield the Street trillions.
Simultaneously, the three quashed the efforts of the Commodity Futures Trading Corporation to regulate derivatives when its director began to worry that derivative trading already was getting out of control.
Reich, who served in three national administrations and was a secretary of labor under President Bill Clinton, says that both financial reform bills now before Congress are filled with loopholes that would allow reckless trading of derivatives to continue.
“Neither bill begins to rectify the basic distortion in the national economy whose rewards and incentives are grotesquely tipped toward Wall Street and financial entrepreneurialism, and away from Main Street and real entrepreneurialism,” says Reich, now a professor of public policy at the University of California at Berkeley.
In January, Peter S. Roberson, a former Congressional aide who worked on legislation to overhaul the nation’s financial regulations, left to work for the world’s top clearinghouse for over-the-counter derivatives, The New York Times reports.
Such clearinghouses stand to gain billions of dollars in new business as a result of the legislation.
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