By: George Warren; Columnist

I have already excoriated ex-President George W. Bush for his part in our present financial crisis. Namely: Allowing investment banks to increase their leverage ratio as high as 40 to 1, allowing them to ‘self-regulate’ voluntarily, eliminating the uptick rule concerning selling stocks short, and winking a blind eye at short sellers who were selling short without owning or borrowing the stock, first. Maybe we should add ignoring whistle blower claims against the Ponzi scheme of Bernard Madoff since the first alert in 2000.
     Perhaps it is only fair we spread our adoration to his predecessor, William J. Clinton. Clinton receives a lot of glory because he left office with a one time budget surplus, and a debt only half of what George W. left. But, just a cursory look at his administration shows that the seeds of our present dilemma were sewn by his administration. Clinton named Robert Rubin, who had spent 26 years at Goldman/Sachs investment bank, his second Treasury Secretary, replacing Lloyd Bentsen. He called Rubin the best since Secretary Alexander Hamilton. In 2009, Marketwatch named Rubin as one of the “10 most unethical people in business.”
     It was he and Fed Chairman Alan Greenspan who together opposed the regulation of derivatives when such regulation was proposed by the Commodity Futures Trading Commission (CFTC). In 1999, Congress stripped the CFTC of any regularity authority over derivatives. It was overexposure to these instruments which led to the failure of Bear-Stearns, Lehman Brothers, Merrill Lynch, and AIG; and obviously threw us into present economic debacle.
     I have already written where Treasury Secretary Rubin led the effort permitting the illegal merger of Citibank, Solomon/ Smith/ Barney Stock Brokers, and Travelers Insurance into one entity, in clear violation of the Glass-Steagall Act. This Act, since the depression, had separated banks and stockbrokers with a brick wall. In 1999, Rubin’s successor, Lawrence Summers, hailed the Gramm/Leach/Bliley Act which effectively repealed Glass –Steagall. Clinton signed it, and the dike started failing. It bothers me that this same Lawrence Summers is now Director of the National Economic Council for President Barrack Obama.
    Anybody over 25 remembers the Enron failure scandal. Now, I have learned that in 2001, retired Treasury Secretary Rubin called a friend at Treasury and requested they use their influence to convince bond rating companies not to lower the rating on the infamous Enron bonds. He was unsuccessful, but he tried. The rest is history.
     Now let me remind you of the financial panic of 1907, or the Bankers’ Panic. Many banks had lent money to a cabal which was trying to buy enough stock to take over the United Copper Company. When the bid failed amid a slowing economy, it caused bank runs and brought about the failure of the Knickerbocker Trust Company, New York’s third largest; leading to the panic. The stock market fell 50 percent that year. There was no Federal Reserve, and financier James Pierpont Morgan gets credit for saving the economy by locking himself and other wealthy bankers into a room until he raised enough capital to shore up the banking system.
     The panic was exacerbated by the existence of what was called “bucket shops.” They posed as stock brokers, and sold stocks with as little as one percent cash down. In reality, they never did the transaction, and it was like dealing with a bookie. By selling at will, they could drive prices down, and wipe out their clients with a margin call. They were called bucket shops because they placed all the trades in a bucket, and decided at day’s end whose trades would win or lose. Fortunately, they were eliminated by the 1920’s.
     I say all that to say this. Our politics and thus our economy are controlled by people with money who are willing to “invest it” to see that laws are enacted to aid and abet them in doing whatever they want in pursuit of the almighty dollar. The politicians are afraid of what the general public thinks, only when they see a mighty tide of negative votes coming in November from their constituents. Is it hopeless? Perhaps not.
     I make the following two modest proposals for your consideration before the next election.
    Campaign contribution limits can never work. We need instead to limit campaign expenditures. Set a per voter maximum limit of what can be spent for every office in the land, with certain maximums to override for local elections. Second, make paid lobbying efforts strictly illegal. Any person who wants is free to lobby, as long as he or she receives no remuneration for the effort. You have got 19 months until November 2010.

PRINTED IN THE APRIL 16, 2009 EDITION