ÿþ<html> <head> <meta http-equiv="content-type" content="text/html;charset=iso-8859-1"> <title>OnlineColumnist&reg;.com: Duke's Damage Control</title> <meta name="generator" content="Adobe GoLive 4"> <style type="text/css"> .style2 { width: 240px; } h2 {margin-bottom:.0001pt; text-align:center; page-break-after:avoid; font-size:12.0pt; font-family:Arial; margin-left: 0in; margin-right: 0in; margin-top: 0in; } h1 {margin-bottom:.0001pt; page-break-after:avoid; font-size:12.0pt; font-family:"Times New Roman"; font-weight:normal; text-decoration:underline; text-underline:single; margin-left: 0in; margin-right: 0in; margin-top: 0in; } .style3 { font-size: x-large; font-weight: bold; } </style> </head> <body bgcolor="white" vlink="black"> <center> <table cool width="624" height="2719" border="0" cellpadding="0" cellspacing="0" gridx="16" showgridx gridy="16" showgridy> <tr height="79"> <td height="118" rowspan="2" valign="top" align="left" xpos="0" class="style2"><a href="aboutdiscobolos.html"><img height="110" width="62" src="images/discobolos.logo.transp.gif" border="0"></a></td> <td width="24" height="118" rowspan="2"></td> <td height="79" colspan="2" valign="top" align="left" xpos="140"><img height="75" width="450" src="images/banner.GIF"></td> <td width="18" height="118" rowspan="2"></td> <td width="1" height="79"><spacer type="block" width="1" height="79"></td> </tr> <tr height="39"> <td width="182" height="39"></td> <td height="39" valign="top" align="left" xpos="322"><a href="aboutdiscobolos.html"><img height="14" width="267" src="images/divisionofNEW.GIF" border="0"></a></td> <td width="1" height="39"><spacer type="block" width="1" height="39"></td> </tr> <tr height="26"> <td width="624" height="26" colspan="6" valign="top" align="left" xpos="0"> <table border="0" width="100%" bgcolor="black" cellspacing="0"> <tr> <td> <table border="0" width="100%" bgcolor="#99ffcc" cellspacing="0" cellpadding="4"> <tr> <td align="center"> <div align="left"> <a href="index.html"><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="2"><strong>HOME</strong></font></a><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="2"><strong> &#149; <a href="articlesindex.html">ARTICLES</a> &#149; <a href="books.html">BOOKS</a> &#149; <a href="teflon.html">THE </a><a href="teflon.html">TEFLON</a><a href="teflon.html"> REPORT</a> &#149; <a href="mailto:letters@onlinecolumnist.com">REACTIONS</a> &#149; <a href="aboutdiscobolos.html">ABOUT DISCOBOLOS</a></strong></font></div> </td> </tr> </table> </td> </tr> </table> </td> </tr> <tr height="1"> <td height="2574" rowspan="2" valign="top" align="left" xpos="0" class="style2"><img height="172" width="111" src="images/johninframe3.jpg"></td> <td height="1" colspan="3"></td> <td width="18" height="2574" rowspan="2"></td> <td width="1" height="1"><spacer type="block" width="1" height="1"></td> </tr> <tr height="2573"> <td height="2573" colspan="3" align="left" xpos="116" content valign="top" csheight="2573"> <font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="5"><b> <br /> Obama Reins in Wall St.</b></font> <p><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular"><b>by John M. Curtis<br> (310) 204-8700</b><br> </font></p> <p><font size="2" face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular"><i>Copyright June 14, 2009<br> All Rights Reserved.</i></font></p> <p><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</span><![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp; </span><span class="style3">L</span>ooking to prevent another economic disaster, President Barack Obama weighed options to overhaul Wall Street, whose recent meltdown cost the nation $7 trillion in national wealth.<span style="mso-spacerun: yes">&nbsp; </span>Wall Street s latest mess spread to the banking sector like in did following the 1929 stock market crash, shuttering some of the nation s largest financial institutions.<span style="mso-spacerun: yes">&nbsp; </span>Four years after the 1929 crash, Congress enacted and signed into law by President Herbert Hoover the Glass Steagall Act, creating the Federal Deposit Insurance Corporation and banning banks from risky stock market investing.<span style="mso-spacerun: yes">&nbsp; </span>Less than 70 years after Glass Steagall in 1999, the Congress passed and President Bill Clinton signed the Gramm, Leach, Bliley Act, in effect, rescinding Glass Steagall, allowing banks to once again play the stock market.<span style="mso-spacerun: yes">&nbsp;&nbsp; </span>Less than 10 years later, the same wild speculation brought down the banking industry.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Barack and his Treasury Secretary Timothy Geithner find themselves battling Wall St.&nbsp; to reenact same rules that kept the banking industry from collapsing for 70 years.<span style="mso-spacerun: yes">&nbsp; </span> America s biggest banks an insurance companies invested heavily in complex mortgage-backed securities known as  derivatives and  credit default swaps, a type of insurance on risky investments.<span style="mso-spacerun: yes">&nbsp; </span>When the recent real estate bubble burst in Dec.  07, it collapsed the derivatives market seizing up banks and insurance industry cash.<span style="mso-spacerun: yes">&nbsp; </span>Banks and insurance companies lost trillions, forcing the nation s largest insurance company AIG into bankruptcy, unable to pay out trillions to banks on insured derivative investments.<span style="mso-spacerun: yes">&nbsp; </span>Federal Reserve Board Chairman Ben S. Bernanke had to rescue AIG and cash-strapped banks, borrowing trillions<span style="mso-spacerun: yes">&nbsp; </span>to make up losses.<span style="mso-spacerun: yes">&nbsp; </span>Today s massive debt has devalued the U.S. dollar.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Geithner and Bernanke must now come up with a new regulatory system that prevents the wild speculation that collapsed U.S. financial markets.<span style="mso-spacerun: yes">&nbsp; </span>In the new regulatory scheme, the Federal Reserve will possess controls to prevent another banking collapse, costing the government and taxpayers trillions in debt.<span style="mso-spacerun: yes">&nbsp; </span>Today s record budget deficits over $2 trillion and $13 trillion national debt now exceed the total U.S. Gross Domestic Product that shrunk by 5.7% in the first quarter.<span style="mso-spacerun: yes">&nbsp; </span>Bernanke and Geithner are well-aware that the present Wall Street commodities and hedge fund industries are outside the regulatory scheme.<span style="mso-spacerun: yes">&nbsp; </span>There s currently no regulatory authority to prevent hedge funds from shorting the market, betting that stocks will go down a process that prevents long-term stock market growth.<span style="mso-spacerun: yes">&nbsp; </span>Current regulatory agencies, like the Securities and Exchange Commission, have no power.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Without greater regulatory control, there s no way to control hedge funds and other unregulated investment groups that resulted in Bernard Madoff s $65 billion Wall Street scam.<span style="mso-spacerun: yes">&nbsp; </span>Despite warnings, SEC officials turned a blind eye to hedge funds and unscrupulous investment groups scamming the public.<span style="mso-spacerun: yes">&nbsp; </span>Bernake and Geithner will be forced to regulate hedge funds, commodities trading markets and investment groups, previously allowed to run wild.<span style="mso-spacerun: yes">&nbsp; </span> On the macro-basis, we re very supportive of reform, said Tim Ryan, president and CEO of the Securities Industry and Financial Markets Association.<span style="mso-spacerun: yes">&nbsp; </span>Ryan knows that hedge funds and commodity trading floors currently run wild without any regulation.<span style="mso-spacerun: yes">&nbsp; </span>Under President George W. Bush, commodity traders at the New York Mercantile Exchange drove oil and gas prices through the roof, damaging the U.S. economy.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Unregulated companies like AIG were allowed to write insurance, without the cash reserves, for trillions of dollars on risky derivative investments.<span style="mso-spacerun: yes">&nbsp; </span>Not only were the investments themselves unsound but insuring them was madness, jeopardizing the world s banking system.<span style="mso-spacerun: yes">&nbsp; </span>By AIG s default, the government had to pour billions into AIG to prevent a global banking disaster.<span style="mso-spacerun: yes">&nbsp; </span>No government agency currently regulates hedge funds, large insurers and other risky investment groups.<span style="mso-spacerun: yes">&nbsp; </span> If you give people enough leverage, they can lose an unbelievably large amount of their own money and that of their clients, said Obama s chief economic advisor, former Clinton Treasury Secretary and Harvard University President Larry Summers.<span style="mso-spacerun: yes">&nbsp; </span>Summers points out that the SEC and Commodity Futures Trading Association have no control over unregulated hedge funds and insurance companies.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Today s broken regulatory scheme invites excessive risk and piracy into an already fragile U.S. financial system.<span style="mso-spacerun: yes">&nbsp; </span>Treasury Secretary Geithner must work with Fed Chairman Bernanke to reinstate Glass Steagall and finally regulate hedge funds and insurance companies that threaten the stock market and U.S. banking system. Never again should banks or insurance companies be allowed to run wild with highly speculative derivative investing.<span style="mso-spacerun: yes">&nbsp; </span> Without some regulation of commodity traders, the U.S. economy will remain a hostage to the oil industry, driving oil and gas prices through the roof and decimating a large swath of American business.<span style="mso-spacerun: yes">&nbsp; </span>Democrats and Republicans must stop feuding and working toward fixing the broken regulatory system.<span style="mso-spacerun: yes">&nbsp; </span> Businesses and consumers need a regulatory system that protects the American economy from fraud and excessive speculation. </p> <p class="MsoNormal"> &nbsp;<u><b>About the Author</b></u></p> <p><b>John M. Curtis</b> writes politically neutral commentary analyzing spin in national and global news. He's editor OnlineColumnist.com and author of <a href="books.html">Dodging The Bullet</a> and <a href="books.html">Operation Charisma</a>.<br> </p> <p></p> </td> <td width="1" height="2573"><spacer type="block" width="1" height="2573"></td> </tr> <tr height="1" cntrlrow> <td height="1" class="style2"><spacer type="block" width="116" height="1"></td> <td width="24" height="1"><spacer type="block" width="24" height="1"></td> <td width="182" height="1"><spacer type="block" width="182" height="1"></td> <td height="1"><spacer type="block" width="283" height="1"></td> <td width="18" height="1"><spacer type="block" width="18" height="1"></td> <td width="1" height="1"></td> </tr> </table> <table border="0" cellpadding="0" cellspacing="2" width="597"> <tr> <td><font size="1" face="Arial,Geneva,Helvetica"> <hr noshade size="1"> </font><a href="index.html"><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="2"><strong>Home</strong></font></a><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="2"><strong> || <a href="articlesindex.html">Articles</a> || <a href="books.html">Books</a> || <a href="teflon.html">The Teflon Report</a> || <a href="mailto:letters@onlinecolumnist.com">Reactions</a> || <a href="aboutdiscobolos.html">About Discobolos</a></strong></font> <div align="left"> <p><font size="1" face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular">This site designed, developed and hosted by the experts at</font><font size="2" face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular"> <a href="http://www.cmeonline.net" target="_blank"><img height="30" width="138" src="images/cmelogoANIM.gif" border="0" align="absmiddle"></a></font></p> </div> <p><font size="2" face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular">&copy;1999-2002 <a href="aboutdiscobolos.html">Discobolos Consulting Services, Inc.</a><br> (310) 204-8300<br> All Rights Reserved. </font></td> </tr> </table> </center> </body> </html>