1) BSC was taken over by JPM and JPM survived – and in fact thrived during the crisis. The major banks that suffered during the crisis in the US were LEH – pure play investment bank – Morgan Stanley – pure play investment bank – Merrill Lynch – pure play investment bank – WaMu – commercial bank – Citigroup – the only mixed bank. BoA, suffered as a result of overpaying for crippled banks such as Countrywide and ML DURING the crisis. This is common knowledge.

Banks that did well during the crisis in the US were HSBC, Barclays, Deutsche Bank and JPM, all of which are universal banks with major investment banks attached. Is this even under dispute?

2) CDS written on any kind of ABS didn’t exist before 1998 and the first ISDA template was 2005. So prior to 2005 they were barely written at all. The ISDA for any sort of CDS was written in 1999. When Summers left the Treasury, the notional amount of CDS written on EVERYTHING was around 1 trillion USD [Source Fabozzi Handbook of Fixed income securities]

For reference vanilla interest rate swaps alone were around 65 trillion – http://www.interestrateswapstoday.com/si ze-of-swap-market.html

3) In 2004 – well after Summrers had left – structured credit based on housing of any sort was 411bn out of a 1770billion ABS or less than a quarter of the ***structured credit market*** which was not a large part of the fixed income market then.

http://www.google.co.uk/url?sa=t&rct=j&q =bma%20cdo&source=web&cd=8&ved=0CFMQFjAH &url=http%3A%2F%2Fwww.public.asu.edu%2F~ chliu1%2Frecapmarkets_dese%2Freadings%2F 16_CDO_Primer_BondMarketAssn.pdf&ei=NOAm T-vIOpDp8QO7zdHVBw&usg=AFQjCNGXnDSRn_yic 8uOV6xgrXPQjcjAcA&cad=rja

As for hedge fund growth, anyone with a passing knowledge of the market knows they took off post 2001. Total AUM in 2000 was 450billion USD, now between 1.8 trillion and 4 trillion depending on your definition

http://www.google.co.uk/url?sa=t&rct=j&q =hedge%20fund%20asset%20under%20manageme nt%20growth%202000-%202008&source=web&cd =9&sqi=2&ved=0CGMQFjAI&url=http%3A%2F%2F www.aima.org%2Fdownload.cfm%2Fdocid%2F61 33E854-63FF-46FC-95347B445AE4ECFC&ei=Z-E mT9ntGoeP0AXp14W-Aw&usg=AFQjCNHITDbVe-ba VFrSVbIG9N3RoibEGQ&cad=rja

Pay as you go CDS on ABS was invented in 2005.

http://www.google.co.uk/url?sa=t&rct=j&q =paug%20cds&source=web&cd=3&sqi=2&ved=0C EAQFjAC&url=http%3A%2F%2Fwww.securitizat ion.net%2Fpdf%2FNomura%2FSyntheticABS_7M ar06.pdf&ei=AuYmT76oB4Sx8gOlseWrBw&usg=A FQjCNEUK5YiGHBCyZWbDPKRv2BK1HHH0Q&cad=rj a

4) Summers bio:

1991–1993, world bank as economist.
1995-Jan 2001, Treasury
Oct 2006 DE Shaw

http://en.wikipedia.org/wiki/Lawrence_Su mmers

AIG brought down by illiquidity in its treasury referenced in “On the Brink”, “Too Big to Fail” and “All the Devils are Here”

Direct quote from FCIC:

“Finally, AIG was increasingly strained by its securities lending business. As a lender of securities, AIG received cash from borrowers, typically equal to between 100% and 1002% of the market value of the securities they lent. As borrowers began questioning AIG’s stability, the company had to accept below-market terms—sometimes accepting cash equal to only 90% of the value of the securities. Furthermore, ****AIG had invested this cash in mortgage-related assets, whose value had fallen****. Since September 2007, state regulators had worked with AIG to reduce exposures of the securities lending program to mortgage-related assets, according to testimony by Eric Dinallo, the former superintendent of the New York State Insurance Department (NYSID). Still, by the end of June 2008, AIG had invested 75 billion in cash in
mortgage-related securities, which had declined in value to 59.5 billion. By late August
2008, the parent company had to provide 3.3 billion to its struggling securities
lending subsidiary, and ***counterparties were demanding 24 billion to offset the
shortfall between the cash collateral provided and the diminished value of the securities.
****”

that help? Sorry I don’t have more Wikipedia links or to some spastic working for the NYT or people whose business model involves trashing traditional investment banking.

1. L. Summers is a narcissist and sociopath. This is why he is both incapable of introspection and angered by those who question him. It is also why he doesn’t care what you think.

2. Credit default swaps were invented circa 1991. They absolutely existed during Summers’ tenure as a policy making official. (This is fact, not supposition).

3. Brooksley Born & others who sought to regulate OTC derivatives in the 1990s were not concerned with how or when individual subtypes of contracts would blow up. They did not care about the discrete dangers of CDS or interest rate swaps or synthetic CDOs (which actually did not yet exist). They cared about the overall system that hid huge amounts of exotic debt off the balance sheets of systemically important financial institutions. They realized that, without more transparency in these markets, it was only a matter of time before someone screwed up and the chain of counterparty risk would cause dominoes to fall. Or cause governments to prop up the screw-ups. The call was for a study of these risks, and the unregulated, opaque system in which they were conceived and traded.

4. The reason Summers et. al. (including Phil Gramm) should have taken these risks seriously can be spelled out in four words: Long Term Capital Management.

5. Gramm Leach Bliley matters not just because it repealed Glass Steagall (which, BTW, Danny, was passed at the direct behest of CitiGroup and no one else) but because it cemented in law the general de-regulation and non-regulation of an opaque and unaccountable financial system whose main purpose appeared, even by the mid 1990s, to be, in rank order: money laundering for drug dealers and dictators, compulsive gambling, and screwing poor folk.