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Cassandra in North Dakota

In November of 1999, when the Senate voted overwhelmingly to approve legislation deregulating the finance industry, The New York Times described part of the debate like this:

The opponents of the measure gloomily predicted that by unshackling banks and enabling them to move more freely into new kinds of financial activities, the new law could lead to an economic crisis down the road when the marketplace is no longer growing briskly.

”I think we will look back in 10 years’ time and say we should not have done this but we did because we forgot the lessons of the past, and that that which is true in the 1930′s is true in 2010,” said Senator Byron L. Dorgan, Democrat of North Dakota. ”I wasn’t around during the 1930′s or the debate over Glass-Steagall. But I was here in the early 1980′s when it was decided to allow the expansion of savings and loans. We have now decided in the name of modernization to forget the lessons of the past, of safety and of soundness.”

Compare that to the predictions of then-Treasury Secretary Larry Summers, who now serves as the top economic adviser to President Obama. ‘This historic legislation,” Summers told the Times in 1999,” will better enable American companies to compete in the new economy.”

Ten years later, we all know what Wall Street’s experiment has done to the country. Dorgan, just one of just eight upper-chamber lawmakers to vote against the bill (vote is here), told Newsweek recently about the frustrations of being a real-life Cassandra.

Newsweek: How did you see this coming?

Dorgan: I saw the development of these complicated financial instruments … and it occurred to me that it’s an unbelievable amount of risk. I introduced several pieces of legislation to regulate it, but my warnings were widely ignored.

Newsweek: Why?

Dorgan: I guess they thought I was old-fashioned. The financial establishment had no interest in slowing down the march toward modernization. But the firewalls were made of tissue paper.

Newsweek: What was it like watching your fears realized?

Dorgan: It makes you sick. I felt strongly that if the banks want to gamble, go to Las Vegas. There’s very little solace in being right, given the carnage. This is one of the most expensive lessons in American history.

Asked about his confidence in Summers to lead the country out of the mess, Dorgan bit his tongue.

“I offered the president my advice about financial advisers early on,” he said. “I’ll leave it at that.”

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