Larry, Larry, Quite Contrary

I don’t pay much attention to the American political scene beyond people like Obama, Bush, McCain, Greenspan, Bernanke etc. That’s why I didn’t recognize Lawrence Summers (not White – an Austrian economist) who is part of Obama’s economic team.

simply Capitalism calls him Committee Member #3. So I went back to my post on the fall and fall of Alan Greenspan, and from there to this NYT article. And Summers makes his appearance-

In 1997, the Commodity Futures Trading Commission, a federal agency that regulates options and futures trading, began exploring derivatives regulation. The commission, then led by a lawyer named Brooksley E. Born, invited comments about how best to oversee certain derivatives.

Ms. Born was concerned that unfettered, opaque trading could “threaten our regulated markets or, indeed, our economy without any federal agency knowing about it,” she said in Congressional testimony. She called for greater disclosure of trades and reserves to cushion against losses.

Ms. Born’s views incited fierce opposition from Mr. Greenspan and Robert E. Rubin, the Treasury secretary then. Treasury lawyers concluded that merely discussing new rules threatened the derivatives market. Mr. Greenspan warned that too many rules would damage Wall Street, prompting traders to take their business overseas.

[…]

In early 1998, Mr. Rubin’s deputy, Lawrence H. Summers, called Ms. Born and chastised her for taking steps he said would lead to a financial crisis, according to Mr. Greenberger. Mr. Summers said he could not recall the conversation but agreed with Mr. Greenspan and Mr. Rubin that Ms. Born’s proposal was “highly problematic.”

Glad to know that Obama is satisfied that “deregulation” was not to blame for the present crisis.

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