In an article titled “The Born Prophecy,” published in the May, 2009 American Bar Association Journal, Richard Schmitt writes about a 1996 conversation between Brooksley E. Born (shortly after she was named to head the Commodity Futures Trading Commission) and Alan Greenspan, the Chairman of the Federal Reserve.

The influential Greenspan was an ardent proponent of unfettered markets. Born was a powerful Washington, DC lawyer with a track record for activist causes. Over lunch in his private dining room at the stately headquarters of the Fed in Washington, Greenspan probed their differences.

Well, Brooksley, I guess you and I will never agree about fraud,” Born, in a recent interview, remembers Greenspan saying.

“What is there not to agree on?” Born says she replied.

“Well, you probably will always believe that there should be laws against fraud, and I don’t think there is any need for a law against fraud,” she recalls him saying. Greenspan, Born says, believed the market would take care of itself.

Further down in this same article Schmidt notes that, according to Greenspan, Born has mischaracterized the conversation and that the alleged conversation is “wholly at variance with my decades-long-held view.”

Actions speak louder than words, of course, proving that Greenspan is largely responsible for ruining the economy of the United States, and that he is lying to attempt to deny a conversation that is wholly consistent with his lack of interest in regulating financial institutions during his tenure at the Fed.

Eliot Spitzer, recently appearing with Arianna Huffington on CNBC, makes one strong point after another.   Stress test the banks now, he asks?  Shouldn’t they have been monitoring the banks all along?   It’s as if a doctor who, after ten years under your care, and after you’ve suffered a heart attack, finally decides to take a blood test.  What the hell has he been doing for ten years, given that he wasn’t doing anything meaningful to monitor your health.

According to Spitzer (see the ten-minute video here), Greenspan’s approach was absolutely destructive to the life savings of middle class tax payers, who are now in the process of subsidizing the big banks “who are burning our money.”   He points out that not one CEO of a bank has been removed.  To the extent that some of the banks look OK at the moment, it’s only because the federal government recently handed them a trillion dollars;  “the Fed is sliding the money to the banks” through a “flim-flam game.”   That’s the money they are burning through.  He sees more financial crises to come, because we haven’t made any significant changes to the system.  “We have leveraged the future of our kids.”  He seriously doubts that the bank “stress tests” are real. Rather, he suspects that they are based on fantasy numbers relating to jobs and debt.  He further points out that the Fed is run by the CEO’s of the very banks that got us into trouble.

Spitzer refers listeners to an article he recently wrote for Slate. The questions focus on whether we should trust the Fed, especially the New York Fed:

Given the power of the N.Y. Fed, it is time to ask some very hard questions about its recent performance. The first question to ask is: Who is the New York Fed? Who exactly has been running the show? Yes, we all know that Tim Geithner was the president and CEO of the N.Y. Fed from 2003 until his ascension as treasury secretary. But who chose him for that position, and to whom did he report? The N.Y. Fed president reports to, and is chosen by, the Fed board of directors.

Huffington points out that the money we’re dealing with now is taxpayer money and that it makes the Enron problem look minuscule.

Economist Robert Shiller (see the separate video) also suggest that the stress tests are not really about objective data, but they are about “animal spirits.”  They are attempts to make the American investors feel confident.