How The U.S. Government Caused The 2008 Depression

   A local businessman, who reads sanityandsense.com, invited me to lunch with him and two other local businessmen.  All three either lost their business, or closed their business, and sold off their assets as a direct result of the 2008 depression.  I was pleased, and somewhat flattered that they wanted my opinion.  But this article is not intended to be a self serving pat on my back. It was written to explain one thing that I said that seemed to shock them.  I hope that you and my three friends find it useful.

   What I said that shocked my three friends was that the size of government did not matter much as long as government does not become a bloated bureaucracy.  The overly simplistic Reaganism: ” The government is the problem, not the solution” has a certain amount of appeal.  This leads to the other simplistic Reaganism: ” Government is too big.  We need a smaller government.”  The catch is that there is a great deal of truth in both statements and a great deal of falsehood in both statements.

   Lets look at some important facts.  The following presidents stated that they believed in smaller government: 1) Ronald Reagan, 2) Bush the elder, 3) Bill Clinton, and 4) George W. Bush.  The facts show that government was larger when they left office than when they entered office.  None of them made government smaller. This is very similar to Congresspeople who say that they want to reduce spending and then vote for ever larger budgets.  Politics is indeed about lying. 

   Politics is also about “code speech”.  “Code speech”,when applied to making government smaller, is really about deregulation and about NOT ENFORCING the law.  Deregulation is “code speech” for allowing the insurance companies to write the laws that regulate insurance companies.  Deregulation is “code speech” for allowing the oil companies to write the laws that regulate energy companies.  Deregulation is “code speech” for allowing large Bank corporations to write laws that regulate banks and securities.  In summary, smaller government and deregulation are a type of code speech that allows the rich and the special interests to avoid obeying the law the way the rest of us do.  The congressional crooks seldom read the laws that they vote on.  Sometimes they admit this by saying: ” I have staff members to advise me.”  You are likely to get this answer only when YOU have done your homework.  I recently asked a congresswoman how she was able to read a bill that was over a thousand pages in length when it was delivered in the afternoon and a vote was taken the next morning.  She assured me that she knew all about the bill although she had not read the final version.  Congressional crooks know no shame!

   There are two regulatory agencies of the federal government that the average person seldom hears about.  They are 1) The Commodity Futures Trading Commission (CFTC) and 2) The Securities and Exchange Commission (SEC).  I am 100% certain that if these two very powerful agencies had been working for the people and enforcing federal law, then the 2008 depression would never have happened. 

   Bill Clinton appointed Brooksley Born as head of the CFTC.  Ms. Born took her job very seriously.  She attempted to meet her responsibilities by regulating a group of complex UNREGULATED derivatives.  She fully understood that if these securities remained unregulated that they had the potential for economic destruction directed at the United States.  Warren Buffett warned that these unregulated derivatives were “financial weapons of mass destruction.”

   But greed won out over common sense.  If Ms. Born were to regulate these securities, then the big bankers would not be able to make huge profits as the market went upward.  Of course, everybody knew that the market would always go upward and never fall, well the investment bankers knew this.  Ms. Born was not reappointed when her term ended because the huge special interest groups did not consider her a team player and “one of them.”  She had some nerve in wanting to regulate and enforce the law. 

   Ms. Born encountered people who did not “like her style” like Robert Rubin, Alan Greenspan, and Lawrence Summers.  She did her best anyway.

   Congress wanted to make sure that the big investment bankers knew they were on their side and passed the Commodity Futures Modernization Act  (CFMA) in 2000.  This act made regulation much more difficult, but the congressional crooks needed to be friendly with the special interests because the next election is not far away.  You may be aware how much money the special interests raise for their congressional friends.  ( Read this website for details.) The action to not reappoint Ms. Born, when combined with CMFA, started the ball rolling toward the 2008 depression.  

   The U.S. Securities and Exchange Commission is a federal agency which has the responsibility for enforcing securities laws and regulating the securities industry.  They have real power, and when the SEC applies that power fairly and forcefully all Americans benefit, except the greedy and underhanded special interests.  This brings us to a gentleman named Christopher Cox.  Mr. Cox was the 28th. chairman of the SEC and he was appointed by George W. Bush on June 2,2005. He was confirmed by the U.S. Senate and assumed power on August 5, 2005.  The official website for the SEC states that Cox “made vigorous enforcement of the securities laws the agency’s top priority…”

    Others have characterized Mr. Cox as a “stooge” for the securities industry.  Judge for yourself by the following two examples.  1) When in 2008, it was a very real belief  that the failure of the American Banking system was near, the Chairman of the Fed had an emergency meeting with the Secretary of the Treasury.  Both were near a state of panic.  They decided that the Chairman of the SEC needed to be with them.  They attempted to reach Mr. Cox at the SEC.  The SEC was closed and Cox was not around.  I guess that 5 p.m. is quitting time for everyone at the SEC.  Finally Mr. Cox was located at a child’s birthday party.  Reports stated that he seemed blissfully unaware that much was happening!                  2) Harry Markopolos was an accountant at an investment firm and he was given the job of learning how to imitate the famous Bernard Madoff.  Mr. Markopolos figutrd out that Madoff was operating a Ponzi scheme.  As a law abiding American, Mr. Markopolos reported his information and evidence to the SEC.  Unfortunately, nobody would listen to him.  You can learn all of the details by reading the book: ” No One Would Listen.” 

   Here is the main point of this essay.  Big government or small government is of ABSOLUTELY NO IMPORTANCE IF THE GOVERNMENT IS NOT WORKING FOR THE PEOPLE AND ENFORCING COMMON SENSE LAWS!

   Both the SEC and the CFTC were working for the special interests and not working for the American people.  If the SEC and the CFTC had been doing their jobs and enforcing the laws of the U.S. , then the 2008 depression would never have happened.  Let us get efficient and honest government first, and then we can have the discussion about the size of government!  

                                R. Van Conoley

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