Tuesday, September 16, 2008

Frank Gaffney-photo courtesy Center for Security Policy

GAFFNEY: Into the fire?

Frank Gaffney


The question on Wall Street in the wake of the latest meltdowns in the U.S. financial sector is “Who’s next?” The more important issue is not which of the major banks or investment firms will follow Lehman Brothers into bankruptcy or Merrill Lynch into fire sale. Rather, the question should be “What’s next?”

After all, the problem afflicting so much of the U.S. capital markets – and, therefore, those around the world – is not one of individual corporations hitting a rough patch and requiring bail-outs from the federal government or the private sector. It is, instead, the result of a reckless disregard for sound investing practices in the unscrupulous pursuit of profit. In a word, the last “what” was “subprime.”

As we all know by now, the practice of building financial houses of cards on various investment instruments based in nontransparent and problematic subprime mortgage-backed securities was a formula for disaster. It induced firms that not only should have known better but are required to behave better to perform unconscionably. In the process, they violated industry standards and government regulations with respect to transparency, disclosure, due diligence, good governance and accountability.

Tragically, in the process of leaping out of the scalding subprime frying pan, Wall Street is heading directly into a fire that promises, if anything, to be more devastating than the present disaster. Incredibly, it bears all the hallmarks of subprime with respect to a lack of transparency, a systematic failure to disclose and an utter absence of due diligence, good governance and accountability. The next “what” is called Shariah-Compliant Finance (SCF).

continue reading at                 www.washingtontimes.com/news/2008/sep/16/into-the-fire/


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