February 03, 2010 02:20 AM UTC

Once again, the fox will guard the henhouse

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• by: CoalCreekWildfire

The home loan crashes in California, Florida, Nevada, and 12 other states where forecast in 2005 by the Mortgage Insurance Companies of America (MICA), a private organization. The Federal Reserve and other banking regulators ignored their own analysts, whose data MICA presented in MICA warning letters. (1)

In 1998, the Federal Reserve ignored warnings of a Derivatives Meltdown from the head of the (Federal) Commodity Futures Trading Commission (CFTC). Four months later Long-Term Capital Management collapsed. (3)

In both cases the Federal Reserve and the appropriate Congressional oversight committees had been warned. Both times the Federal Reserve did nothing, Greenspan in 1998 and Bernanke in 2005. Bernanke joined the Federal Reserve in 2002 and should have heard the warnings before he took over.

The failures were bipartisan, including:

• Clinton and his Treasury Secretary Robert Rubin (now at Citigroup)

• Bush and his Treasury Secretary John Snow (now at Cerberus Capital Management)

• Barney Frank and Chris Dodd

Is the Federal Reserve a politically independent player with the “clean hands” needed to manage systemic risk? The answer is clearly “No.”

Alan Greenspan headed the Federal Reserve for almost 20 years (1987 to 2006) and – if he listened to the press – must have come to think of himself as a financial God. Ben Bernanke failed to warn of the coming meltdown – or do anything when he took office – but he still has his job.

The Federal Reserve is broken and does not deserve to gain more control over our financial markets.

(1) Elizabeth MacDonald, Housing Red Flags Ignored, Fox News Business, 2/2/2010 8:38 AM (viewed 2/2/2010 12:12 PM MT) https://emac.blogs.foxbusiness….

(2) Buying a Home: Help for Low-Income Home Buyers, PrivateMI (viewed 2/2/2010 at 13:56 MT) https://www.privatemi.com/buyin…

(3) The Warning, PBS Frontline, https://www.pbs.org/wgbh/pages/…