Questions on PBS Frontline Video: “The Warning”. You can Google PBS Frontline Vi
ID: 351779 • Letter: Q
Question
Questions on PBS Frontline Video: “The Warning”. You can Google PBS Frontline Video: “The Warning”)
What was the ethical culture of the derivatives market prior to 2008? Were there any standards of conduct, rules of operation or record keeping of transactions?
Who attempted to address the problem in the derivatives market, and why was her effort ignored as “potentially disruptive regulation?”
What were the politics by which the big three--who were they--made decisions that led to a cluster of errors by the government?
Have any government officials been held accountable or disciplined for their responsibility for the financial collapse?
Explanation / Answer
What was the ethical culture of the derivatives market prior to 2008? Were there any standards of conduct, rules of operation or record keeping of transactions?
Nothing was ethical about the derivatives market prior to 2008. They were so complicated that only a handful knew about them.
There were no standards of conduct, rules of operation or record keeping partly because the government and the Fed did not believe in regulation. Even fraud was supposed to be taken care by the markets themselves.
Who attempted to address the problem in the derivatives market, and why was her effort ignored as “potentially disruptive regulation?”
Brooksly Born, the then chairman of CFTC (Commodities Futures Trading Commission) attempted to address the problem in the derivatives market. She brought about a concept release to regulate Over The Counter (OTC) derivatives. Her effort was ignored as potentially disruptive because the mood at the time was that deregulation was responsible for the boom in financial markets and any attempt to regulate would disrupt that boom.
What were the politics by which the big three--who were they--made decisions that led to a cluster of errors by the government?
It was the politics of institutions each trying to bolster their ideology and this ideology was mostly of the people who led these institutions at that time. The institutions were CFTC on one side of the turf war, The Fed, Treasury and SEC on the other side. The big three were the then Fed Reserve Chariman Alan Greenspan, the then Treasury secretaries Robert Rubin and Lawrence Summers
Have any government officials been held accountable or disciplined for their responsibility for the financial collapse?
None of the government officials have been held accountable or disciplined. It is mostly because of the complexity associated with the issue and the immunity that government officials have where some of their decisions have been wrong but not illegal.
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