On the front page of the New York Times today (Oct. 9) is a story that is MUST reading. It tells how U.S. economic leadership, particularly former Federal Reserve Chairman Alan Greenspan, failed to see how financial derivatives could cause a chain reaction exploding the financial system. Greenspan and Bill Clinton's former treasury secretary, Robert E. Rubin, conspired to block any attempts at regulation of these lethal instruments. Five years ago, as this blog has related many times, Warren Buffett called derivatives "financial weapons of mass destruction" that were "potentially lethal." New York banker Felix Rohatyn, credited with saving New York City in its 1970s crisis, called derivatives "hydrogen bombs." Spurred by a Massachusetts Congressman, the General Accounting Office issued a report in 1994 warning of the consequences of a derivatives meltdown. In 1997, the head of the Commodity Futures Trading Commission wanted derivatives regulated. Greenspan, Rubin, and Rubin's then-deputy, Lawrence Summers, successfully thwarted the effort. University of San Diego law professor Frank Partnoy, who warned of derivatives in a 1997 book, is quoted in the story saying, "Clearly, derivatives are a centerpiece of the crisis, and [Greenspan] was the leading proponent of the deregulation of derivatives." The Times states a truth that must be repeated and repeated: "The Wall Street debacle that swallowed firms like Bear Stearns and Lehman Brothers, and imperiled the insurance giant American International Group, has been driven by the fact that they and their customers were linked to one another by derivatives." Buffett, Rohatyn, Partnoy and some journalists foresaw it; U.S. economic leadership did not.