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I believe "Smackdown" is the official term.

I think Brad has copyright on that......

Just a few weeks ago, he was complaining he couldn't find enough "smackdowns". This should please him!

Well put, Simon.

Well, you're more right than Delong is, I'll give you that Stephen. Here's a couple of quotes for you,

"Consciously or unconsciously, we began to lift restrictions and to lower standards throughout the financial sector ... General economic activity was drawn towards the financial sector by this explosion in ever-less regulated activities. Inventiveness concentrated itself on the creation of new, immeasurable financial abstractions - abstractions built upon abstractions - forms and levels of leverage which made the standards of 1929 seem tame by comparison ... In this context, the traditional definitions of bank leverage no longer mean very much. ... the American merchant bank Lehman Brothers had a capital base of $270 million. It had a daily exposure of $10 billion."

That's from John Ralston Saul, written in 1992.

Or try this,

"There is a substantial and growing basis for the conclusion of Felix Rohatyn, a senior partner with Lazard Freres & Co, that:

'In many cases hedge funds, and speculative activity in general, may now be more responsible for foreign exchange and interest rate movements than interventions by the central banks.

...Derivatives...create a chain of risk linking financial institutions and corporations throughout the world; any weakness or break in that chain (such as the failure of a large institution heavily invested in derivatives) could create a problem of serious proportions for the international financial system.'

The fact that many major corporations, banks and even local governments have become active players in the derivatives markets as a means of boosting their profits began to attract the attention of the business press in 1994. The risks can be substantial, yet the institutions that have been major players generally do not disclose their financial exposure in derivatives in their public financial statements, preferring to treat them as 'off-balance-sheet' transactions. This makes it impossible for investors and the public to properly assess the real risks involved. The truth becomes known only as major losses are reported."

That's from David Korten in 1995, he goes on to list derivative related losses taken at Procter & Gamble, the Bank of New England, Paine Webber, BankAmerica, Orange County and Barings Bank, all cases that occurred in 1994-95. Noting that the Barings case was followed by a 4.6% fall in the Nikkei, he concludes, "That the actions of a single trader of no particular personal wealth or reputation could produce such a consequence is one of a growing number of indicators of the instability of a globalized financial system..."

By 1995 at the latest, the dangers were obvious to anyone paying attention and not blinded by adherence to free market ideology. Clinton could have and should have done more, but to be fair he would have been fighting against the spirit of the times.

To see what I mean, recall this old column from Paul Krugman,
"Consider the press conference held on June 3, 2003 — just about the time subprime lending was starting to go wild — to announce a new initiative aimed at reducing the regulatory burden on banks. Representatives of four of the five government agencies responsible for financial supervision used tree shears to attack a stack of paper representing bank regulations. The fifth representative, James Gilleran of the Office of Thrift Supervision, wielded a chainsaw."

Sorry, I forgot to include a second quote from Korten who goes on to say,

"Typical is the position articulated by Thomas A. Russo, managing director and chief legal officer of Lehman Brothers Inc., a major investment house, in a New York Times op-ed piece,

'...The evolution of financial products has not been followed by a regulatory evolution, and the mismatch has created problems ... To add more rules to a system that was never designed for derivatives can only enlarge these problems. On the other hand, a complete overhaul of the system is politically unrealistic, The only remaining remedy: derivatives dealers and regulators should jointly formulate principles of good business practice for the industry. ...'

Russo's observation that the financial system has acquired such political power as to virtually preclude its reform is, of course, accurate."

Again, that's from 1995.

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