What we do know is that it’s the result of the sub prime mortgage crisis; one large inst after another is--we have seen a number of them folding already and others are in danger of folding so the issue now is, according to Bernake and according to Paulson, if the congress does not act in the very near future, very short term, they worry very much about a financial meltdown.
Now, the difficulty that many people have--in congress, most members of Congress and Senators are not PhD economists. And many of these new financial instruments, these "credit swaps" and so forth and so on, are enormously complicated; I mean, I was listening to Paulson today; we just had a meeting with him a few hours ago, he was saying, you know somebody was talking about the government taking a look at that, and he was saying, "You know, hey, there are very few people that understand this; you're not going to find this in the government. But your point about these people using deregulation to engage in incredibly risky behavior so that they can make wild and excessive short term profits then endangering the entire system; that is exactly right, and they cannot be rewarded.
I think we have to take a hard look at how we got to where we are today. I mean, it is interesting that your local bank, which makes loans to people they know; they know whether these people can repay the loans, they know the small businesses. They're doing just fine, and I think, by the way, that's the case with the state of Vermont as well. But when you have these huge companies, you have people selling loans and absolutely irresponsibly, making money, fully understanding that in a few years people are not going to be able to repay these loans, and they don't take responsibility for it; they just pass it on to somebody else, who passes it on to somebody else, and it ends up in Japan or God knows where; you got a real problem with that type of system.
Kall: The second half of the hour I have David Korten on. He wrote the Post Corporate World; Life After Capitalism. Are you familiar with his writing at all?
Sanders: I've heard the title, but honestly I haven't read it.
Kall: Basically, what he's saying is all the complicated derivatives that make money on money we've got to get rid of them, too. We've got to get back to Main Street, where people make money making products and services. That's where we should be taking care of business and not with all these "theoretical" constructs.
Sanders: That makes a lot of sense, I mean look at what's happened, right now; you’ve seen a tremendous increase in financial institutions in the amount of money they play with at the same time as we're seeing the loss of millions of good paying manufacturing jobs we make less and less in America and we're importing almost everything we use from another country; I think you don't have to be a PhD in economics to understand that there's something a little but weird that we're not making real products that our people are consuming and that we're losing family farms and so much of our wealth is tied up in these very exotic and complicated financial transactions that are taking plac3 under the radar screen, without transparency.
Just the other day on another issue, not unrelated but a separate issue, is the price of oil went soaring; there's been a big debate in congress as to why the price of oil is as high as it is, why people pay $3.70 for a gallon of gas. The conservatives and the Republicans say it is all supply and demand, But when you see these wild fluctuations that take place in a day. That has nothing to do with supply and demand that has to do with money being pumped in to oil futures and a significant amount of those transactions take place also away from the public eye; they are not transparent we don't know who controls what, we do know that in recent years, whether it was Enron capturing electricity distribution on the west coast; whether it's BP, who put a corner on propane and Amarand, a hedge fund, putting a corner on natural gas. In all three of those markets: electricity on the west coast, natural gas and propane, there was significant price manipulation.
Kall: What about-- just recently they put a freeze for a couple of days on "short selling". Why can't they do that on speculation in oil?
Sanders: I don't know the answer to that; what I can tell you is that some of us have worked very hard to pass legislation that would do away with the Enron loophole which would allow transparency, where today things are operating underneath the radar screen and there's a lot more that has to be done--
Kall: Who's blocking it?
Sanders: Well, obviously the energy companies, the oil companies have enormous power the Republicans are not interested in (unintell); they rather "drill baby, drill," although that won't lower the price of gas, if at all, for another 15 years or so.
Kall: It seems like right now, there's an incredible opportunity we've got a failed system, it's broken. Even the Wall street journal has said that "Wall Street as we knew it is dead." Is there any talk in the Senate of really evaluating what's going on and coming up with something "new and different" that makes more sense?
Sanders: It doesn't quite work quite like that (laughs). No. The answer is no to that. But I think on the part of th4e American people, they are asking those questions, but I can't tell you that's really filtered up to the Senate. What is just stunning—
Kall: I don't get it there: how do we get it up to the Senate? Why—
Sanders: What we need to do, number one obviously we need a new president we need to elect Obama, number t23wo we need a strong grass roots movement who has to say to the Congress , "Stop looking to your campaign contributors for advice; listen to the needs of ordinary Americans.
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