Monthly Archive for May, 2010

by Jeff Madrick, in The New York Review of Books

Not the least striking revelation of Michael Lewis’s excellent book, The Big Short, is that this author of financial best-sellers has changed his mind. In a column for Bloomberg News in early 2007, he praised the rapidly expanding market for derivatives. Visiting the annual meeting of financiers and policymakers at the World Economic Forum in Davos, Switzerland, that year, he was exasperated by the fears of some of the participants. “None of them seemed to understand that when you create a derivative you don’t add to the sum total of risk in the financial world,” he wrote, sounding arguments very similar to those made by Alan Greenspan. “You merely create a means for redistributing that risk. They have no evidence that financial risk is being redistributed in ways we should all worry about.”

To read more…

From Ethical Markets

The Senate just voted, 96-0, to audit the Federal Reserve. Soon, we will know what the Federal Reserve did with the trillions of dollars that it handed out during the financial crisis.

A few months ago, such a vote would have been unthinkable. One senior Treasury official claimed he would fight to stop an audit ‘at all costs’. Senator Chris Dodd predicted that an audit would spell economic doom, while Senator Judd Gregg attacked accountability for the Fed as “pandering populism”.

Today, both the Treasury Department and Senator Dodd support this amendment. As for Judd Gregg, he was just on the floor of the Senate discussing — of all people — 19th century populist Presidential candidate William Jennings Bryan.

What happened?

People Power is what happened. We built a coalition of people on the right and the left, ordinary citizens and economists, ex-regulators and politicians, all with one question for which we demanded an answer: “What happened to our money?”

To read more…