The list is interesting, but incomplete
True... "Congress passed and Bill Clinton signed the Commodity Futures Modernization Act in 2000 that largely allowed the derivatives market to grow without regulation" but congress was led by the Republicans at the time and this act was the second last piece of legislation sign be Clinton before he left office. It is truly a POS twilight legislation that created the ENRON loop hole and deregulated electronic energy trading ie increases in electric rates and then the run up to $145 a barrel oil. The Loop hole was finally closed in June 2008 only after Bush had vetoed the first attempt to close the loophole. After the loophole was closed the price of oil started to decline thereafter. IMO not a coincidence.
True... "Completely missed and/or ignored the 10 year build up of the estimated $160+ TRILLION dollar derivatives market." But Bernanke was made head of the Fed on February 1, 2006. One of the first things Bernie did in March 2006 was to stop reporting M3 of the monetary supply.
See This M3 March 2006 estimate was $10,000,000,000,000 March 2008 13,000,000,000,000. M3 is where all the derivatives should have been reported and not surprisingly its still rising although everything else is in the dump. M# is now estimated to be $14,500,000,000,000 and still rising. Now you would think that if it was a real problem the Fed might start reporting on it again, but they aren't, so the article lays the blame a little too heavy on congress and not enough on the Fed on that one. After all they were the ones that starting to hide the facts back in 2006.
True.... Fanny and freddy were problems, but they followed the private market in to the lucrative sub prime mortgages. In fact the private sector is responsible for about 75% of all subprime mortgages, not fanny and freddie.
True... "Allowed banks such as Bear, Lehman and others to borrow 30, 40 and even 50 times their capital base for a multiyear period." but its worse than that. They got money and were able to lever it up to 30 to 1, then they took the levered money and invested in CDOs and other derivative junk where it was levered another 30 to 1, making it 900 to 1. Meaning that if you lost 1/10 of 1 percent on the investment, then the investment was under water. Then commodities increased in price, the middle class suffered an income crunch and the mortgage defaults started to come in and these 900 to 1 investment destroyed all the capital these companies had. The problem here was Reaganomics run amok with little or no regulation, the supply siders ran up the commodities using deregulated electronic energy trading, and then there was the graft and corruption in the sec and the bond rating companies.
The article is flawed if it wants to scape goat congress and ignore what really happened. Congress is bailing out everyone because if it went to punish all the guilty parties it would have to gut and kill wall street the big banks, the energy traders and lots of others. This thing stinks they are all friends.... Look at Geithner and the others who are supposed to fix the problems, they are all fed lackeys and the whole thing is very incestual.
But anyway, to me the two theories that got us here are reaganomics with the small govt no regulation let the corruption reign BS AND the supply siders and their price fixing policies. Between the two camps, its only taken 25 years to ruin the country.
