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FIREMAN TIM
My wife looks up from the newspaper with bewilderment at another story about people in the financial world or their lobbyists complaining about Wall Street Fire codes.
Four years ago, on an evening in March 2008, I received a call from Jimmy Con the CEO of Bear Stearns informing me that they had a giant toxic inferno in their building.
Bear Stearns was the smallest of the major Wall Street fire traps, but it was deeply entwined in financial markets and had the perfect mix of innovative flammables.
When the CEO of Bear Stearns called that night, it was not because I was his firm's supervisor or regulator, his mistress or his poker partner, but because I was then the head of the Federal Reserve Fire Department of New York, which serves as the volunteer fire department for Wall Street.
The financial fire regulations in the law at that moment were as tragically antiquated and weak as they are today. Neither the Fed, nor any other federal agency, has the necessary comprehensive fire code enforcement authority over Ponzi tinderboxes like Bear Stearns, hazardous waste operations like AIG, government-sponsored chemical waste dumps like Fannie Mae and Freddie Mac and financial arsonists like Goldman Sachs.
Fire Code Regulators such as myself did not have the mental bandwith they needed to oversee and impose prudent fire safety practices on large nonbank financial institutions. And they had no authority to extinguish fires at these firms, or bank holding companies. The fire safeguards on banks were much tougher than those applied to any other part of the financial waste origination and storage system, but even those provisions were not strong enough to prevent the mother of all blazing asset backed/derivative kahunas.
The failure to modernize the financial fire safety system sooner is the most important reason why this financial wildfire was more severe than any since the Great Depression, and why it has been so hard to extinguish the fires of the crisis. Our failure to implement safety reforms is why the crisis has caused gross domestic product to fall at an annual rate of 9% in the last quarter of 2008; why millions of Americans lost their jobs, homes, businesses and savings; why the housing market is still so far from recovery; and why our national debt has grown so significantly.
In order to calm the sheeple, President Obama asked Congress to create the appearance of fire reforms quickly, even though no one in office seems to know how to put the fires out and even if they did who would pay them to do so? Put simply, The Dodd-Frank Wall Street Fire Code Reform and TBTF Protection Act, signed into law by the president on July 21, 2010 is a flame retarded regulatory farce.
Four years after the financial wild fires began to unfold, some people seem to be suffering from amnesia about how close America is to complete financial conflagration under the outdated regulatory system we now have. May I say Lloyd, no small feat to deliver.
My wife occasionally looks up from the newspaper with bewilderment while reading another story about the proliferating wild fires in the financial world and says: "WTF are you doing everyday numb nuts?"
To this I confidently reply...absolutely nothing.
Tim Geithner
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