Fun with chemistry

Ive been through three chemistry explosions. A flask of oxygen and acetylene blew up. The second involved molten sodium on water. The third involved hydrogen, which lifted the airship Hindenburg, burning in that disaster. All were at age 12. All produced immense explosions that totally consumed the scientific apparatus.

Theres a moral to this tale. Children should be supervised when playing with exciting but dangerous stuff. So should grown-ups. Financial derivatives create exciting profits for Wall Street. They also create dangerous political contributions. Theres the rub, as Hamlet said. After the Constitution was drafted, Ben Franklin told a bystander that America would have a democracy if you can keep it. So, have we? Welcome to the tragedy.

If you voted for Republicans, you voted to gut trade unions, which used to support the Democrats financially. And you voted for a conservative Supreme Court. It gutted the McCain-Feingold campaign finance reform law, an issue right there. (Sharper Focus, Guns are People, April 3, 2014) Political campaigns now cost millions. Hence, Bill Clinton had no alternative but to accept Wall Streets money simply to stay in the game. But he who pays the piper calls the tune. Clinton had made a bargain with the devil. He was beholden to Wall Street. He signed the 1999 Financial Services Modernization Act and the 2000 Commodity Futures Modernization Act (jammed last-minute into a crucial funding bill by Republican Sen. Phil Gramm, R-Texas). These acts of Congress were the chemistry experiments, as it were, of Alan Greenspan, Robert Rubin, Sandy Weill, Larry Summers and our dear departed friends Milton Friedman and Ronald Reagan.

And they were experiments on a grand scale. The number of derivatives issued was estimated at $600 trillion. For comparison, Americas entire annual economic output was around $14 trillion. Heres the point: these derivatives grew enormously, could do massive damage, but were entirely unregulated. There were no adults supervising the children playing in the science lab.

The whole lot blew up in 2008 and nearly consumed the entire science lab, to wit, the economy. Finance houses fell like dominos and industrial output plunged worldwide, remember? This disaster was entirely foreseen by people with functioning brains. Democrat and self-made billionaire Warren Buffett said Wall Streets derivatives were financial weapons of mass destruction. Strong stuff! But he was ignored. He wasnt part of the gravy train, refusing even to touch those derivatives. Brooksley Born, head of the Commodity Futures Trading Commission, made a valiant stand against the gravy train. She was silenced, of course. Naysayers are boring. Chemistrys fun!

A very nasty derivative is called a credit default swap. Now, swaps arent all bad. I have one myself. I went to AAA and said, Swap you some dough for a car policy. They swapped a possible hit to their reserves in exchange for my moolah. But theres another rub. What if the children have fun cranking out billions in swaps, rake in moolah by the millions, but dont have enough reserves to pay the claims when the whole lot blows up?

Simple. You pay! Yes, my friends, thats you. Well, Uncle Sam. Republicans know that Sams a soft touch. The worlds largest insurance company, AIG, cost Sam $182 billion for its bailout in 2008. Its been repaid, but thats not the point. Taxpayers took the risk, but got a lousy return. Why?

Simple. Mustnt charge our friends on Wall Street too much!

Washington doesnt regulate Wall Street; Wall Street regulates Washington. You can read this tragedy in Robert Scheers excellent 2010 book, The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street. Yes: Clinton is one of the best Republican presidents weve had, giving us disastrous bipartisan solutions. The 2008 Crash cost America about $15 trillion in lost wealth, threw millions out of work, and made all Americans look like fools. And swindlers, to boot: the Swiss, Germans and British were bilked out of billions.

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Fun with chemistry