Could we soon have federal protection against healthcare insurance rescissions? Stand by!

Kaiser Daily Health Policy Report
kaisernetwork.org, July 18, 2008
Capitol Hill Watch

House Committee To Investigate Health Insurance Policy Rescissions Nationwide

House Oversight and Government Reform Committee Chair Henry Waxman (D-Calif.) on Thursday at a hearing on health insurance policy rescissions said that the committee will launch a broad investigation into practices used by private health insurers in the individual market, CQ HealthBeat reports (Reichard, CQ HealthBeat, 7/17). About 14 million U.S. residents purchase health insurance through the individual market (Girion [1], Los Angeles Times, 7/18).

Waxman said that the investigation is necessary as a number of proposals seek to expand health insurance to more U.S. residents through the individual market (CQ HealthBeat, 7/17). As part of the investigation, the committee will send inquiries and requests for policy documents to a number of large health insurers (Girion [1], Los Angeles Times, 7/18).

Waxman said that whether federal legislation is needed to regulate the practices used by health insurers in the individual market remains undetermined. "We'll do an investigation first, and then we'll see if it makes sense," he said.

Hearing

The hearing focused on rescissions, a practice in which health insurers retroactively cancel individual coverage policies because of fraudulent or misrepresented information on applications and leave former policyholders liable for all medical claims previously covered by their policies. In addition, the hearing examined "post-claims underwriting," a practice in which health insurers re-evaluate policyholder applications after they had begun to file medical claims. The re-evaluations in some cases lead to policy cancellations or rescissions (CQ HealthBeat, 7/17).

During the hearing, Stephanie Kanwit of America's Health Insurance Plans said that policy cancellations and rescissions are necessary to protect health insurers from fraud. She said that health insurers cancel about 0.2% of individual coverage policies annually.

Kanwit also said that AHIP in December 2007 issued new guidelines on policy cancellations (Goldstein, Bloomberg/Indianapolis Star, 7/18). Under the guidelines, policies should state clearly that policyholders have the right to appeal rescissions and that a third party should administer their appeals, she said (CQ HealthBeat, 7/17). However, when asked by Waxman, Kanwit could not provide information on the number of health insurers that follow the guidelines (Bloomberg/Indianapolis Star, 7/18).

HIPAA Protection?

Waxman said that, under the Health Insurance Portability and Accountability Act, individual health insurance policyholders who have their policies canceled have the right to have their coverage renewed unless they have committed fraud or misrepresented their medical information intentionally. However, only four CMS employees administer HIPAA, and the agency has never taken action against health insurers for post-claims underwriting that violates the rights of policyholders under the law, Waxman said.

According to Abby Block, director of the Center for Drug and Health Plan Choice at CMS, the agency intervenes in such cases only when states fail to take appropriate action to protect policyholders. Block also said that states are responsible for allegations of improper policy cancellations or rescissions (CQ HealthBeat, 7/17).

California Fines

Officials from Anthem Blue Cross and Blue Shield of California on Thursday agreed to pay $13 million in fines and offer new health plans to more than 2,200 California residents who had their coverage rescinded after becoming ill and incurring large medical bills, the Los Angeles Times reports. Under the agreement, Anthem will pay a $10 million fine to the state Department of Managed Health Care and will offer new policies to the 1,770 former members who have had their coverage canceled since 2004, while Blue Shield will pay a $3 million fine to DMHC and will offer new policies to the 450 former members who have had their coverage canceled since 2004.

The fines are the "stiffest penalties yet in efforts by state authorities to curb what they view as an abusive practice of investigating and canceling policies after policyholders run up big medical bills," according to the Times. DMHC Director Cindy Ehnes said, "The fine is a record in DMHC history and it sends the message that if you come into California and sell health insurance, you must play by the rules" (Girion [2], Los Angeles Times, 7/18). Last week, Ehnes said that insurers who did not agree to settlements would face stiffer penalties (Tayefe Mohajer, AP/Contra Costa Times, 7/18).

In addition, the insurers agreed to establish a process for former policyholders to be compensated for medical costs they paid out of pocket after they were dropped from their plan, as well as other damages, such as loss of home or business resulting from bad credit due to unpaid medical debts. Neither insurer admitted any wrongdoing under the agreement.

As a result of Thursday's announcement and another deal struck earlier this year with Kaiser Permanente, Health Net and PacifiCare, nearly 4,000 California residents have had their coverage reinstated, according to Ehnes. The settlement also closes DMHC's investigation into rescissions.

According to the Times, the settlements do not directly affect a lawsuit by Los Angeles City Attorney Rocky Delgadillo, which involves rescissions by Blue Cross; lawsuits by former members seeking financial compensation; and Insurance Commissioner Steve Poizner's investigations into insurers' rescission practices (Girion [2], Los Angeles Times, 7/18).

Possible Future Fines

Blue Shield agreed to the settlement because although there is a lack of direction from the state on rescission practices, the insurer wants to move on from the issue, according to Blue Shield Vice President of Public Affairs Tom Epstein. Blue Shield could face an additional $2 million fine in 18 months if it does not simplify its applications and become more transparent with enrollees and members who are being investigated and risk losing their coverage, according to Ehnes. Epstein said, "We are certain to do those processes to avoid that fine" (AP/Contra Costa Times, 7/18).

Los Angeles Lawsuit

In related news, Los Angeles City Attorney Rocky Delgadillo on Wednesday filed a more than $1 billion suit against Blue Shield of California, alleging that the company illegally rescinded coverage for 850 policyholders after they became ill and filed claims, the Times reports. According to the suit, the not-for-profit insurer uses complex and confusing applications for coverage to facilitate mistakes by individuals that can later be used to cancel their coverage. Delgadillo said, "For decades, health insurers have gamed the system and reaped billions. The time has come to ... set things right."

The suit also accuses Blue Shield of falsely advertising its coverage, alleging that the insurer often rescinds coverage when members need substantial medical care.

Blue Shield spokesperson Tom Epstein said the suit is a "cheap political stunt" and "totally without merit." He said Delgadillo does not have a "shred of evidence" that the company acted improperly. The applications used for new members were reviewed and approved by two state regulators, Epstein noted. He said Blue Shield "has always been careful in our underwriting of health coverage policies and in our investigations of the rare contracts that are rescinded," adding, "This is why we have rescinded a fraction of 1% of individual and family policies."

Delgadillo brought similar suits earlier this year against Anthem Blue Cross and HealthNet (Girion, Los Angeles Times, 7/17).

From John Curry

An open letter to U.S. Representative Jim Jordan

From John Curry, July 18, 2008

Dear U.S. Representative Jim Jordan,

As an Ohio retiree and a resident of your Ohio House District I am asking you to explain your reason(s) for voting "no" on the recent Medicare (HR 6331) Presidential veto override in both the U.S. House and U.S. Senate. You and John Boehner were the only two Ohio House members who did not go along with your fellow Ohio Representatives (both Republican and Democrat) on this vote. Two of your fellow U.S. House members already made their statements concerning this vote. They are listed below. I have seen no public statement from you concerning this vote. I, and others, would like to hear your side of the story. Thank you.

Sincerely, John Curry Wapakoneta, Ohio

“This is a victory for seniors and those with disabilities. By passing this legislation, Congress is preventing a 10.6% pay-cut to doctors who provide Medicare. This is especially important for Americans living in rural areas who have fewer choices when it comes to medical providers. If their doctors stopped taking Medicare, they could literally be left without a provider in the community. Today’s action makes sure that some of our most vulnerable citizens will continue to have affordable, reliable health care and be able to continue getting the care they need from the doctors they already know and trust. I’m proud that we were able to override the President’s veto and strengthen Medicare for America’s seniors.”

-- Rep. Charlie Wilson (OH-6)

“Today, we have achieved an important victory for our country’s seniors and families. The improvements in this bill will ensure that Medicare recipients can continue to see the doctors they know and trust, and receive the quality care they deserve. It will also ensure that physicians providing care will be fairly compensated.

“Sadly, this crucial legislation was nearly derailed by the President’s careless and ill-conceived veto. If his veto had stood, it would have jeopardized healthcare access for the millions of seniors and other vulnerable Americans who rely on Medicare for their health coverage. Thankfully, my colleagues and I stood up against the President, overriding his veto to turn this measure into law.

“The well-being of our seniors is one of our most important responsibilities; with today’s vote we are upholding that duty.”

-- Rep. Betty Sutton (OH-13)

Sunshine, offshore accounts, bologna, and the playing field is beginning to become a little more level!

From John Curry, July 17, 2008

Supreme Court Justice Louis D. Brandeis once said, "Sunshine is the best disinfectant," and that's more true than ever today. You pay tax on ALL of your income but some Americans conveniently hide their monies overseas accounts and avoid paying their fair share of tax. The poor SOB who steals a package of bologna gets 3 days in the local "lock up" but thousands of Americans who steal millions of dollars of our (and your) tax monies get off Scott free. Now, the playing field is starting to become a little more level, isn't it? John

"Faced with a federal investigation into its private banking practices, the Swiss bank giant, UBS, said on Thursday that it would stop offering offshore-banking services to clients in the United States."

"Federal prosecutors say that UBS, the world’s largest private bank, helped American clients hide $20 billion overseas in secret offshore accounts, evading $300 million or more in taxes. The Internal Revenue Service and federal prosecutors ordered UBS earlier this month to hand over the names of a number of wealthy American clients."

“Client identity is generally protected from disclosure under Swiss law, but such privacy protections do not apply when disclosure of client names is requested in connection with an investigation of tax fraud,” Mr. Branson said.

July 18, 2008

UBS Stops Offshore Banking for U.S. Clients

By BERNIE BECKER and JULIA WERDIGIER

New York Times

WASHINGTON — Faced with a federal investigation into its private banking practices, the Swiss bank giant, UBS, said on Thursday that it would stop offering offshore-banking services to clients in the United States.

“We have decided to exit entirely the business in question,” Mark Branson, chief financial officer of UBS’s global wealth-management unit, said in his opening statement before a Senate subcommittee.

In his testimony, Mr. Branson apologized for any compliance failures that may have happened and said the decision to close its Switzerland-based cross-border business was intended to ensure that such failures did not happen again.

Clients in the United States will continue to be able to access UBS’s services through wealth management units that are regulated by the Securities and Exchange Commission, he said. But advisers based in Switzerland will not be allowed to come to the United States to meet with American clients.

UBS’s decision came as a surprise even to Senator Carl Levin, the Michigan Democrat and subcommittee chairman, who said in his opening statement that UBS operated “behind a wall of secrecy” that needed to be torn down.

“I thought we were prepared for any possibility,” Mr. Levin said after the hearing. “It turns out we weren’t.”

The report by Mr. Levin’s subcommittee said that UBS and LGT, a bank owned by the royal family of Liechtenstein, helped Americans avoid taxes by setting up convoluted foreign-owned offshore accounts whose assets did not have to be reported to the Internal Revenue Service.

Federal prosecutors say that UBS, the world’s largest private bank, helped American clients hide $20 billion overseas in secret offshore accounts, evading $300 million or more in taxes. The Internal Revenue Service and federal prosecutors ordered UBS earlier this month to hand over the names of a number of wealthy American clients.

The investigation initially focused on Bradley Birkenfeld, an American who is a top UBS executive in the private banking sector, and who pleaded guilty in June on a single fraud charge. But the investigation has since widened and now focuses on UBS’s services offered to clients in the United States from Switzerland.

Mr. Branson said on Thursday that UBS was working with the federal government to identify the names of American clients who may have engaged in tax fraud.

“Client identity is generally protected from disclosure under Swiss law, but such privacy protections do not apply when disclosure of client names is requested in connection with an investigation of tax fraud,” Mr. Branson said.

The investigation has caused some concern among UBS’s employees in the United States, who are “understandably alarmed by the reports of misconduct that they have seen,” Mr. Branson said.

UBS started an investigation into practices of its cross-border business last year and even though the bank had detailed written policies prohibiting employees from engaging in misconduct, like assisting in the creation of sham offshore companies to defraud tax authorities, Mr. Branson admitted that controls and supervision were “inadequate.”

Some analysts said UBS needed to be cautious to protect the reputation of its wealth management business — considered the crown jewel of the company — especially after write-downs on assets in its investment banking unit prompted the Swiss bank to report a loss in the first quarter.

Bernie Becker reported from Washington and Julia Werdigier from London.

Donna Thorp's speech to STRS, June 19, 2008

Good afternoon. My name is Donna Thorp. I was trained as a speech therapist --- or “speech correctionist” as it was called in 1953 at the University of Illinois, or “speech pathologist” at the University of Cincinnati in 1976. I retired in 1991 with just over 23 years of service.

First of all, I want to say THANK YOU to John Lazares for his loyal service to the Board. He has endured difficult knee surgeries accompanied by much pain. I am very happy to see that he seems much better. John, I wish you well, and I mean really well. Thank you especially for your participation in the reform of the STRS Board.

In 2003, I was horrified to read of the shame of having our executive director asked to leave by our legislators. He and the board did not follow the instructions of the Ohio Revised Code to use the money “…for the exclusive purpose of providing benefits to the participants….” Rather they chose to spend the money as they saw fit.

Some friends and I began attending STRS board meetings that summer, and we were present at the formation of CORE. We are proud to be part of this grassroots movement. But -- this has been going on for five years! My question is, Why in 2008 do we still feel the need to be watchdogs?

In 1979 I was asked to teach the first classroom in Clinton County for children with multihandicaps. There was controversy about putting these children into a public school building. Some people were not always easy to get along with. To keep above this I tried to always remember the question, “What is best for this child?” Might you also focus your thoughts on, “What is best for the members?” -- Not any outside group, or yourself, and not in response to your irritation at another member.

You are the adults here. Please do your homework, ask questions, follow ORC 3307.15 and do what is best for the members. Thank you.

Duane Tron to Congressman Jordan: Override that veto!

From Duane Tron, July 15, 2008
Subject: President's Veto of Medicare Bill

Dear Jim,

You need to vote to override the President's veto of the Medicare Bill. I am presently paying $11,600.00 a year, out of my $35,900.00/yr pension, for health insurance for Mary and myself through the Ohio State Teacher's Retirement System. These horrific increases were imposed four years after I retired and are unacceptable. For those of us who have worked our entire lives and paid into this system it is outrageous that the President would veto this legislation. Based on my count the House will override the President's veto. You can line up and vote with a Lame Duck President who has secured the same legacy for himself that Bob Taft did as Governor of Ohio, or you can demonstrate that you represent your constituents and vote to override. We are watching and awaiting your vote.

Duane & Mary Tron
St. Paris, OH 43072

McCain Plan to Aid States on Health Could Be Costly

From John Curry, July 13, 2008

Subject: What have they been smoking?

NY Times July 9, 2008
View article here: McCain Plan to Aid States on Health Could Be Costly
"There is no census of the medically uninsurable. But in 2006, insurers turned down 11 percent of all individual applicants for medical reasons, including 22 percent of those 50 or older, according to America’s Health Insurance Plans, an industry trade group."

Note from John: And to those who are lucky(?) enough to be medically insurable with a history of diabetes, heart disease, cancer, and on and on and on......you can imagine the ungodly premium rates that they are charged for healthcare. On top of that, how 'bout the 47+ million in this country who can't afford healthcare insurance PLUS the thousands of STRS retirees who can't afford to insure their pre-Medicare age spouse because of no STRS subsidy for them unlike retirees of OPERS and other "state" retirement systems.

And yet....some educators, including OEA officials, have the gall to stand before the STRS Board in the 3 minute public speaks portion of the meeting and "thank" the Board for maintaining "affordable" healthcare insurance! What have they been smoking? John

John Curry to Ron Lederman re: article on payday lenders, 'Lawmakers will do the deciding for us'

From John Curry, July 13, 2008

Mr. Lederman,

In reference to your Lima News article re. payday lenders (Lawmakers will do the deciding for us) : Were you aware that HB 545 (now O.R.C.) included a provision for banks and other lending institutions to provide small short-term loans as now addressed in Section 135.68?

I find your statement, "To be sure, some people aren't capable of making these decisions. Most of the rest of the nation calls them children. Ohio lawmakers call them constituents," somewhat amusing.

You might remember that the next time you go to the filling station and buy 20 gallons of gasoline and are guaranteed that the pump is really selling you 20 gallons as it, by law, was mandatorily inspected by your county's government and.... your stop for burgers insured you of safe meat as the U.S.D.A. (once again) mandatorily inspected it. Your trip for burgers and gas was accomplished on D.O.T. approved (for safety, your safety) tires and your brakes and window glass also had to meet federal safety inspections. All of those, as well as payday lender regulations, were done for your and my well-being and safety. You seem to forget that the public deserves their government to be responsible for the well-being of the public.

I suppose that if you don't like the government looking out for your well-being, and that of the public, you could always buy a horse for transportation and pack your lunch with home-grown vegetables and home-butchered meat...then you'd eliminate a lot of those meddlesome and intrusive laws, wouldn't you?

John
Wapakoneta

Lawmakers will do the deciding for us

By Ronald Lederman Jr. (photo)

LimaOhio.com, July 11, 2008

Those pesky people in the payday loan industry just won't let it go. How do they expect success from Ohio's bipartisan effort to rescue irresponsible people if they keep interfering with the dictates of state lawmakers?

Those payday lenders seem hung up on the idea that people should be free to borrow money based on their needs, abilities and circumstances. Don't they see that Ohio Republicans and Democrats decided for us? Lawmakers have been busy of late penning columns about the freedoms of being American - they have July 4 on their calendars, too - but they're sure to get around to keeping greedy bankers from taking advantage of us dumb Ohioans.

The payday loan industry isn't willing to wait. Ohio Attorney General Nancy Hardin Rogers last week approved language for a petition drive to repeal the state's ban on payday lending. A bipartisan effort cracked down on payday lending, capping interest rates at 28 percent a year and limiting people to four such loans each year. As things stood, the $15 charge per $100 borrowed would amount to 391 percent annual interest, provided a person kept the loan alive for an entire year.

Paying almost $400 in interest for a $100 loan is such a bad idea that lawmakers don't trust you to avoid doing so. Instead, lawmakers from both parties and Democratic Gov. Ted Strickland protected everyone from the bogeyman of what if by taking away the one borrowing option some people had. (No one ever came forward with a story of paying 391 percent, but it was mathematically possible, so we got legislation to kill 6,000 jobs as Ohio suffers one of the nation's worst economies.)

So you're short on cash and you're unlikely to qualify for a traditional loan, particularly for a couple hundred dollars as credit is tightening. Our lawmakers are helping you plan for the next time this happens, whatever bind it leaves you in now. Your dentist will understand you don't have the money. The kids can skip a meal or two. The electricity will come back on when you have the money.

Since everyone plans for the emergencies that drove some people to seek the short-term loans, such tough love is needed. Remove the one out some people had for situations they didn't see coming - we call those emergencies - and what choice is there but to plan for the situations for which no one plans?

You see the favor state lawmakers have done you. Unfortunately, the payday loan industry doesn't. These same busybodies no doubt would object to our honorable state representatives passing laws that use force to help us eat healthier or exercise more often. Why do we elect these people if we're not going to trust the individual decisions they make for each of us?

To be sure, some people aren't capable of making these decisions. Most of the rest of the nation calls them children. Ohio lawmakers call them constituents.

And perhaps voters will have to finish the job of protecting us from ourselves that lawmakers started. Once that happens, you'd expect lawmakers to place similar restrictions on banks. Such a move isn't likely to come from this area's state lawmakers, however, as Sen. Keith Faber, R-Celina, was the only one to vote against his campaign theme of less regulation.

That $15 on a $100 loan is less than half the overdraft fee some banks charge. Ohio lawmakers couldn't have been protecting the banking industry, so who do you suppose will move to restrict banks from charging stiffer fees for essentially the same type of borrowing?

Fannie Mae and Freddie Mac: STRSers....how many $$ did we lose on this last round?

From John Curry, July 13, 2008

"It's dispiriting indeed to watch the United States financial system, supposedly the envy of the world, being taken to its knees. But that’s the show we’re watching, brought to you by somnambulant regulators, greedy bank executives and incompetent corporate directors."

“It is crystal clear that the Fed not only made mistakes, they had the pompoms out, cheering for deregulation,......."

"A week ago, Bridgewater Associates, a research firm, estimated that losses from the credit crisis we’re now mired in might amount to $1.6 trillion when all is said and done. We’ll have to wait years to see if this is accurate. But whatever the number is, it will also represent, in stunning red ink, the cost to society of financiers who are shortsighted and greedy and regulators who don’t regulate."

July 13, 2008
Fair Game
The Fannie and Freddie Fallout
By GRETCHEN MORGENSON
New York Times

IT’S dispiriting indeed to watch the United States financial system, supposedly the envy of the world, being taken to its knees. But that’s the show we’re watching, brought to you by somnambulant regulators, greedy bank executives and incompetent corporate directors.

This wasn’t the way the “ownership society” was supposed to work. Investors weren’t supposed to watch their financial stocks plummet more than 70 percent in less than a year. And taxpayers weren’t supposed to be left holding defaulted mortgages and abandoned homes while executives who presided over balance sheet implosions walked away with millions.

Over the course of this 18-month financial crisis, we have lurched from land mine to land mine. Last week’s was all about Fannie Mae and Freddie Mac, the giant government-sponsored enterprises set up to provide affordable housing across the nation. By issuing debt, these shareholder-owned companies guarantee or own more than $5 trillion in home mortgages. Got that? $5 trillion.

Because the federal government established the companies, investors view them as backed, at least implicitly, by taxpayers. And that implied guarantee is what drove Fannie and Freddie’s business models.

The advantages the companies gained from this unique arrangement were huge. They had to keep less cash on hand than traditional lenders, for example. They also made more money on their mortgages than lenders because they paid less to borrow money in the bond market. These profits enriched Fannie and Freddie shareholders over the years and bestowed significant wealth on the companies’ executives.

Now it looks as if the bill for that largess is coming due. Of course, it will be borne by the usual bagholders: United States taxpayers. You and me.

For years, anyone warning that Fannie and Freddie should beef up their financial positions was ridiculed or run over by the lobbying machines these companies kept oiled and close at hand. So their lucrative arrangement remained the same: business as usual, with all its riches, was the goal. After all, wasting money by inflating their cash cushions would just crimp their style.

Suddenly, Fannie and Freddie’s relatively anemic capital supply is a concern. Last week, Fannie’s stock plummeted to $10.25, down 74 percent in 2008. Freddie’s shares also dived, closing at $7.75, a loss of 77 percent this year.

Even as investors were stampeding out of these stocks, the claque in Washington rushed to reassure them. Both Ben S. Bernanke, the Federal Reserve Board chairman, and Henry M. Paulson Jr., the Treasury secretary, said the mortgage giants’ regulators confirmed that the companies were “adequately capitalized.”

THAT was supposed to signal that the companies wouldn’t have to raise capital immediately because regulators had the problem firmly in hand. But investors have good reason to be skeptical. In the first half of 2007, both Mr. Bernanke and Mr. Paulson sang a similar tune when they opined that problems in the mortgage market were “contained” to subprime loans.

Talk of adequate capital also brings to mind comments made last March, when Bear Stearns was on the ropes, by Christopher Cox, the chairman of the Securities and Exchange Commission. He tried to calm investors by telling them that Bear Stearns passed financial muster. Days later, the firm was toe-tagged.

Which brings us to the main problem: credibility. Wall Street and our senior regulators seem to be running out of that precious commodity almost as quickly as cash.

It wasn’t as if this problem came out of left field. Fears that Fannie and Freddie were getting too big have been a recurring theme in recent years. And Congress has had ample opportunity to create a new regulator that would be vigilant about ensuring the safety and soundness of both companies.

But even after both companies were found to have accounted for their results improperly, Freddie Mac in 2003 and Fannie Mae in 2004, Congress failed to act. As a result, Fannie and Freddie were allowed to become high-growth companies and stock market darlings.

“These companies would have been fine had they been forced to be the cyclical utilities they were intended to be,” said Josh Rosner, an analyst at Graham-Fisher, an independent research firm in New York. “They would be healthy and able to help the markets in this time of illiquidity.”

Instead, they are in trouble and their woes are infecting the entire stock market.

The surprise is not that Fannie and Freddie grew too large for the taxpayers’ good. That was to be expected among companies run by executives whose pay is based on profit growth.

Rather it is that Congress and the various financial regulators, especially the Fed and the Office of Federal Housing Enterprise Oversight, did little to keep the companies from getting out of control.

MAYBE the loans held or backed by Fannie and Freddie will turn out to be better performers than those held by other lenders. That would mean fewer losses than investors seem to be anticipating now and would still the cries for fresh capital.

But if their losses follow the patterns seen at other lenders, some sort of regulatory takeover may occur. That would mean a lot of pain for a lot of folks — especially both companies’ stockholders and the broader community of people depending on a secure, smoothly functioning mortgage market.

“The real outrage is that none of this had to happen,” said William A. Fleckenstein, co-author of “Greenspan’s Bubbles: The Age of Ignorance at the Federal Reserve” and president of Fleckenstein Capital in Issaquah, Wash. “We did not have to ruin the financial system and ruin the financial lives of a huge chunk of the middle class in the United States.”

“It is crystal clear that the Fed not only made mistakes, they had the pompoms out, cheering for deregulation,” he adds. “Until people recognize why we are in this mess, I don’t see how we get out of this thing.”

A week ago, Bridgewater Associates, a research firm, estimated that losses from the credit crisis we’re now mired in might amount to $1.6 trillion when all is said and done.

We’ll have to wait years to see if this is accurate. But whatever the number is, it will also represent, in stunning red ink, the cost to society of financiers who are shortsighted and greedy and regulators who don’t regulate.