The 2008 crash isn’t over, only covered up

March 8, 2011, 12:01 a.m. EST
Paul B. Farrell
The 2008 crash isn’t over, only covered up
Commentary: Reaganomics driving us into Phase 2 of meltdown
SAN LUIS OBISPO, Calif. (MarketWatch) — We have hard evidence Washington and Wall Street knew the 2008 crash was coming years in advance. Yes, they could have prevented it. But didn’t. And, yes, the cover-up cost Americans trillions.

Was their Reaganomics ideology so rigid, so blinding, they couldn’t (and still cannot) admit they were wrong? Forcing them to lie to America? Cover up the lies? The evidence is clear.
Today, a harsh lesson from history, facts and a warning. Listen closely America. It’s already happening again. The collective Reaganomics Brain has gone from crash to cover-up to comeback kid to capitalism-for-the-super-rich in three short years. Now with absolute power over America.

But the worst is yet to come. The forces behind the 2008 crash are stronger today. Like the villain in a horror-flick sequel, the dark side is now hungrier. Phase 2 is already in full swing as the Reaganomics Brain aggressively races to complete unfinished business — the 2008 meltdown — which will implode Wall Street banks and the Fed, ending the reign of the dollar as the world’s reserve currency

Recently we reported some bearish predictions for 2011 by two respected market leaders: Ned Davis warns of a “midyear peak” before a new cyclical bear. Jeremy Grantham warns investors to get out before Christmas. Market Crash 2011: It will hit by Christmas.

Bad news for investors angry at the past, worried about the future. Remember, the Dow’s barely above its best 2000 level of 11,722. Adjusted for inflation, the market has flatlined the past decade.

America’s boomers don’t have to be rocket scientists to see the workings of the Reaganomics Brain here, how it’s destroying capitalism, democracy and their retirements. Here’s hard evidence of lies and cover-ups in past and future catastrophes:
March 2004. Fed Chairman Greenspan ‘cover-up’ of coming crash

In a Bloomberg Market’s magazine column last year, “Greenspan Cover-up,” Roger Lowenstein, author of “The End of Wall Street,” wrote that in a newly released transcript of a March 2004 meeting Greenspan “argues against disclosing too much to the public lest the Fed ‘lose control of a process that only we fully understand’.” Yes, a cover-up.

Lowenstein was classy, but went ballistic: “This statement ranks as a sign of monumental arrogance. It was Greenspan himself who didn’t understand, much less ‘fully understand,’ that the Fed’s lax mortgage regulation and easy monetary policies were setting America up for a disastrous fall.”

Then the indictment: “Had the Fed publicized such concerns, it might have led to a crackdown and forestalled millions of bad mortgages that would be written over the following 2 1/2 years. Instead, the Fed released minutes with sanitized phrases that had been stripped of alarming language.” Lying by omission, then a cover-up.

Now ask yourself: Was Greenspan so blinded from being inside the myopic echo chamber of the collective Reaganomics Brain for so many years that he, like all other insiders, is forced to lie, then cover up the lies?
Aug 2006. New Treasury secretary in ‘cover-up’ of crash dead ahead

As a postscript to the meltdown, Bloomberg later reported that back in August 2006, a month after Henry Paulson left Goldman Sachs as CEO with a net worth of over $500 million to become the new Treasury secretary, he spoke to the White House staff at Camp David: “Paulson held up over-the-counter derivatives as an example of financial innovation that could, under certain circumstances, blow up in Wall Street’s face and affect the whole economy.”

Reminds us of Warren Buffett’s famous reference to derivatives a “financial weapons of mass destruction.” 
Cover-up? Conflict of interest? You bet. America’s Treasury secretary had the facts, but never warned the public. Worse: Instead, happy talk and lies from Paulson, covering up the risks. More than anyone in America, as Goldman’s CEO, Paulson knew about all about the deadly risks in the $500 trillion global derivatives casino, from years building Goldman’s derivatives business.

Worse: Later, when we learned about Goldman’s cover-up in failing to disclose to its own investors its double-dealing with AIG and hedge fund shorting, Paulson’s conflict of interest became clearer. He should have disclosed the risks, yes, had a duty to warn America, but instead refused to share, chose instead to lie and cover up for years.
July 2007. Paulson and Bernanke ‘cover up’ crash after it began

Cover-up? Lie? America’s Treasury Secretary? Yes, a cover-up at the top. One year after becoming Wall Street’s Trojan Horse on the inside of Washington, as the meltdown spread rapidly across Wall Street, this guy with the keys to trillions of the American taxpayer’s retirement money, could have come clean. But instead he was locked into the collective Reaganomics Brain ideology, forced to perpetuate the cover-up.

Yes, Paulson could have told the truth to the American public, to investors and taxpayers, but instead Paulson told Fortune magazine: “This is far and away the strongest global economy I’ve seen in my business lifetime.”

What a whopper. Part of the bigger overall cover-up of the collective Reaganomics Brain ideologues, for during these pre-meltdown years, Paulson, Greenspan and new Fed Chairman Ben Bernanke were regaling America with happy-talk about the subprime mortgage crisis being “contained,” just “regional froth.”
October 2008. Meltdown, then Paulson cons a clueless Congress

America’s Treasury Secretary, Hank Paulson was Wall Street’s man on the inside in the fall of 2008 just before the presidential election.

He failed America when the derivative markets collapsed, by conning Congress into protecting his Wall Street buddies with cash, credits and sweetheart deals, even though they were insolvent, virtually bankrupt and had no negotiating power.

Cover-up? Yes, the Reaganomics Brain ideologues were inside, running America for Wall Street’s benefit rather than the American taxpayer. Paulson’s old buddies were all well-protected — to be paid out of retirement monies from America’s boomers.
March 2011. Greenspan leading new Reaganomics resurgence

The Reaganomics Brain that’s ruled America for the past generation is making a swift comeback as the dominant political ideology favored by Wall Street. Last week Bloomberg news put this dangerous resurgence in the spotlight, in effect confirming that the worst of the 2008 meltdown was never completed, historical lessons never learned, and that another crash — like the aftershock of a deadly earthquake — is coming soon to complete the unfinished business.

Here’s why: Bloomberg just reported on a Greenspan’s article in International Finance magazine. He’s not only defending his legacy with renewed allegiance to the ultra-conservative Reaganomics Brain dogma that sustained him for 18 years; Greenspan now blames Obama’s Keynesian policies for the slow recovery. Listen:

Greenspan’s “conclusions fit with his long-held free-market ideology.” He warns “a surge in U.S. government ‘activism,’ including fiscal stimulus, housing subsidies and new regulations, is holding back the economic recovery.” But like Paulson and the rest of this Reaganomics Brain resurgence, there’s no acceptance of his personal past in the meltdown, only blame.

Greenspan sees the problem with the recovery of the American economy as the Democrats failure to embrace free market, deregulation and massive tax cuts, not Greenspan’s failed monetary policies, not Bush’s costly preemptive wars, not Cheney’s belief that “deficits don’t matter.”
Warnings ignored 2000 to 2008, still denied, the price we’ll pay grows

Back in an early 2008 quarterly letter to investors, Jeremy Grantham, whose GMO firm manages $100 billion worldwide, said the warning signs of a coming crash were everywhere. But few listened.

As Grantham put it, “the three or four dozen-odd characters screaming about it are always going to be ignored.” Past and future. Why? It’s a brain defect, trapped in our DNA, overriding our rational abilities.

Worse, the new Reaganomics ideologues like Bernanke, the GOP, Tea Party, even Obama, are now marching in lockstep, embracing Reaganomics, squashing all descent, and repeating the same economic blunders as Greenspan and Paulson.

For more information read my report of 22 warnings from major market figures starting in 2000 till the 2008 meltdown. My summary includes warnings by one SEC chairman, two Fed Governors, five leading economists, four billionaires, five money managers overseeing trillions, two leading financial historians, and many more not on the list. 20 reasons a new mega-bubble will pop in 2011.

All their warnings were ignored, lied about and covered up by Greenspan, Paulson and all the other Reaganomics Brain ideologues running Washington and Wall Street the past generation. But soon a powerful revolution will stop the lies and the cover-ups.