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The Parallels of Brooksley Born and Elizabeth Warren

Brooksley Born was head of the Commodities Futures Trading Commission (CFTC) under Clinton from 1994 through 1999. Born recognized the dangers to the financial system inherent in the growing derivatives and swaps market (a prescience that proved all too correct in the financial meltdown in 2008). She wanted to regulate, limit, and make trading in these markets open and transparent.

She was vociferously opposed by the then Fed Chairman Alan Greenspan; Secretary of the Treasury Robert Rubin; and Undersecretary of the Treasury Larry Summers. This troika — all pushing for deregulation of the financial markets, not more regulation — was eventually successful in isolating Born and opposing her rulings.

Today Elizabeth Warren is opposed not only by one the big banks’ water carrier, Chris Dodd, but also by the current Fed Chairman Ben Bernanke; Secretary of the Treasury Timothy Geithner; and Larry Summers, head of Obama’s National Economic Council – the latter two both being proteges of Robert Rubin, now an executive at Citibank — one of the biggest traders in the derivatives and swaps markets.

The main purpose of the Consumer Protection Agency, in large part initiated by Elizabeth Warren, is to protect the consumer in its dealings with financial institutions concerning mortgages, credit cards, fees, other types of consumer loans, etc.

To date, the even bigger, too-big-to-fail banks — commercial banks that along with investment banking brought the American economy to its knees — have been partially recapitalized (bailed out) with the generous assistance of the American taxpayers, through TARP, a myriad of Fed programs, including the outright purchase/guarantees of toxic loans of the banks, as well as through the assistance of other regulatory agencies. The banks have also become more profitable, but nonetheless they still have enormous amounts of toxic debts (bad debts which are still growing; debt that could be in the trillions of dollars) on their books.

In order to write-down or write-off toxic debt in bad mortgages, commercial loans, credit card debt, etc., the big banks have to continually generate even bigger profits through as many sources as they can; including mortgages rates, bank fees, credit card rates/penalties, etc.

With Elizabeth Warren, as head of an agency mandated to protect the consumer against unscrupulous lending, and unfair/illegal fees and penalties, there is an inherent contradiction going on between the needs of the banks and the agency brought into being to protect the rights of consumers.

Bernanke, Geithner, and Summers (with Robert Rubin still in the shadows) are all about protecting the interests of the big banks/Wall Street.

If they can’t stop her appointment (which, if done, will be a last minute political sop to the base; along with DADT), then they will have to find other ways to try to isolate her, and circumscribe her power and authority in drawing up regulations and implementing enforcement mechanisms on financial institutions.

Greenspan, Rubin, and Summers succeeded in squelching the power and authority of CFTCs Brooksley Born in 1999. Will Bernanke, Geithner, and Summers be able to do the same to Elizabeth Warren in 2010, should she be appointed/confirmed as head of the new Consumer Protection Agency — an agency, again, whose very existence is due to the tireless efforts of Elizabeth Warren?

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