Courtesy of Pam Martens
(Left to Right) Former Fed Chair Alan Greenspan, Treasury Secretary Robert Rubin and then Deputy Secretary of the Treasury Larry Summers
The New York Times published a 1300-word shallow dive into the byzantine, globally-interconnected world of financial derivatives in its print edition yesterday. After years of ignoring this seismic problem since it last blew up the U.S. financial system in 2008, what accounts for the New York Times’ newfound interest? We can sum up its 1300 word article using only three letters – CYA.
What frightened the Times into this foray into the dark web of financial derivatives held by the biggest Wall Street banks was a frightening, 111-page deep dive into the subject by Michael Greenberger, a law professor at the University of Maryland’s Carey School of Law. Greenberger knows a thing or two about derivatives, having previously served from 1997 to 1999 as the Director of the Division of Trading and Markets at the Commodity Futures Trading Commission (CFTC) under its head Brooksley Born.
Michael Greenberger
That was the period of time when Born fought to regulate over-the-counter derivatives and was sabotaged in her efforts by President Bill Clinton’s cozy attachment to Wall Street’s power and money and by Wall Street sycophants, Fed Chair Alan Greenspan, Treasury Secretary Robert Rubin and then Deputy Secretary of the Treasury, Larry Summers. Summers would later breeze into Rubin’s slot when Rubin left to join the Board of Citigroup, a major derivatives player. Rubin, who served in a non-management position on the Citigroup Board, would make $120 million in compensation over the next decade, leaving the bank collapsing from its derivatives and off balance sheet debt when he left in 2009. (See Robert Rubin Exorcises Citigroup from His Career in Today’s NYT OpEd.)
Citigroup received the largest taxpayer bailout in global financial history, receiving $45 billion in capital from the U.S. Treasury; the Federal government guaranteed over $300 billion of Citigroup’s assets; the Federal Deposit Insurance Corporation (FDIC) guaranteed $5.75 billion of its senior unsecured debt and $26 billion of its commercial paper and interbank deposits; and the Federal Reserve secretly made a cumulative $2.5 trillion in almost zero interest rate loans to Citigroup from 2007 through at least the middle of 2010, according to an audit by the Government Accountability Office.
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