Five years ago this week, the financial system unraveled due to recklessness on Wall Street and regulatory failures in Washington. The American people paid a terrible price -- persistent and widespread unemployment, millions of foreclosures, and household wealth and retirement savings wiped away. Yet little, if anything, has changed on Wall Street and the biggest banks have suffered no real political, economic, or legal consequences for the damage they caused our nation.
Over the next few days, I will be posting five critical must-dos -- starting today with No. 5 -- to prevent another crisis and to remake our financial system and economy to serve all Americans, not just powerful financial interests. I'll also include short summaries of some of the seminal events of the financial meltdown of 2008, drawn from the timeline on the website of the Financial Crisis Inquiry Commission (FCIC) which may be found at fcic.law.stanford.edu.
Must Do #5 - A Federal Reserve Chair Who Will Protect the Public Interest, Not Wall Street
The Federal Reserve, under the leadership of Alan Greenspan, bears central responsibility for the crash of 2008. It was the one agency that was fully empowered to stem the flow of toxic mortgages and it did not. The FCIC cited the Federal Reserve's pivotal failure as a prime example of what led to disaster.
President Obama will soon nominate a new chair of the Federal Reserve. Our nation needs someone at the helm of the Fed who will be resolute in the oversight of the big banks in the face of their no holds barred, rear guard action to scuttle reform. Someone who will fight for an economy that puts people back to work and rebuilds the middle class. Someone who was not part of the deregulatory movement that stripped away or blocked key safeguards that could have averted catastrophe. Someone with a fresh perspective, not someone from the Wall Street - Washington axis.
Janet Yellen.
To read more: http://bit.ly/1cEUuJw.
5 Years Ago Today in the Financial Crisis
On Tuesday, September 9, 2008:
- AIG CEO Robert Willumstad meets with Federal Reserve Bank of New York President Timothy Geithner to discuss AIG's financial condition and to "discuss ways in which AIG and the Federal Reserve might work together in the event that a liquidity problem did arise."
- JP Morgan sends a team to meet with Lehman regarding "capital raise options"; Korea Development Bank announces that it has ended its talks with Lehman; and Lehman's stock plunges 45%, its largest daily percentage decline.
- Treasury Secretary Henry Paulson, Federal Reserve Board Chairman Ben Bernanke, Federal Reserve Bank of New York President Timothy Geithner, Federal Reserve Governor Kevin Warsh, Securities and Exchange Commission Chairman Cox and staff participate in a telephone call to discuss the developments with Lehman Brothers.
- The Dow Jones fell by 280 points (2.43%) and the S&P dropped by 43 points (3.41%).