NYT: Don't Forget Shumer's Role in the Mess
“Since the financial meltdown, people have been asking, ‘Where was Congress? Why didn’t they see this coming? Why didn’t they provide better oversight?’ And the answer for some, including Senator Schumer, is that they were actually too busy pursuing a deregulatory agenda. Their focus was on how we have to lighten up regulation on Wall Street.”
-Barbara Roper, director of investor protection for the Consumer Federation of America
Today's New York Times has a damning article linking Senator Chuck Schumer to many of the radical deregulatory policies that underlie much of the current crisis.
I have assessed a lot of blame for the crisis on several people -- Greenspan at the top of the list, followed by several others, including President Bush. Phil Gramm was a prime sponsor of all manners of ruinous legislation -- which, I hasten to add, was signed into law by one President Clinton (he sure isn't blameless in the mess).
Bush WH Ignored Mortgage Meltdown Warnings
A brutally damning article about the warnings the Bush administration received and ignored was published this morning by AP. The AP summed up the philosophy of the Bush White House, writing: "The administration's blind eye to the impending crisis is emblematic of its governing philosophy, which trusted market forces and discounted the value of government intervention in the economy. Its belief ironically has ushered in the most massive government intervention since the 1930s."
The Bush administration backed off proposed crackdowns on no-money-down, interest-only mortgages years before the economy collapsed, buckling to pressure from some of the same banks that have now failed. It ignored remarkably prescient warnings that foretold the financial meltdown, according to an Associated Press review of regulatory documents.
Regulation after Bush
What does the future hold for regulating Wall Street?
Regardless of who wins today's election, both Barack Obama and John McCain have staked out different positions on issues involving economic regulation – and each is very different than the outgoing president.
The Economists' Voice looks at what we might expect in the post-Bush era:
While the presidential candidates have been diverted by critical issues ranging from Barack Obama’s taste in lettuce to John McCain’s condo, it’s hard to deny that, once elected, serious questions involving economic regulation—everything from housing finance to alternative energy mandates—will be front and center. And here, at least, the divisions are clear: Obama would use a heavy hand to push the economy back on track, while McCain would do his best to put the free back in free markets.
Or maybe not.
Ever since the New Deal, Democrats have largely accepted the label as the party of regulation—defenders of the weak from the vagaries of soulless capitalism. Republicans, for their part, position themselves as the nemeses of the social engineers and do-gooders who would sap the economy of vigor. But once in office, reality bites. Thus, with more than a little encouragement from Detroit, Ike committed the GOP to the biggest public works project in history— the Interstate Highway System. Richard Nixon imposed price controls to contain inflation, while Ronald Reagan protected the swooning steel industry from foreign competitors and the first President Bush championed market intervention in the name of cleaner air and accommodations for the disabled. The second Bush hasn’t stood on principle either, lavishing seniors with heavily subsidized prescription drugs and supporting bailouts for both investment bankers and the giant private mortgage insurers.
Democrats, of course, have been no better at sticking to their script. Carter deregulated airlines and trucking, while Clinton deregulated telecommunications and nuclear enrichment as well as opening the door to cheap Mexican imports.
Thus, while Obama and McCain may both lull true believers with the bromides of an earlier generation, a subtler mix of ideology and interest group muscle is bound to drive the regulatory agenda once elected. Consider just a few of the big choices ahead.
"Regulation after Bush"
Robert Hahn and Peter Passell
The Economists' Voice: Vol. 5 : Iss. 4, Article 5. (2008)
Seven Deadly Sins of the Meltdown
Fabulous cartoon circulating by email -- if anyone knows of the original source, please let me know --
Source: Steve Breen, San Diego Union Tribune, 10/18/08
Greenspan: "I Suck"
Former Federal Reserve Chairman Alan Greenspan said a ``once-in-a-century credit tsunami'' has engulfed financial markets and conceded that his free-market ideology shunning regulation was flawed.
"Yes, I found a flaw,'' Greenspan said in response to grilling from the House Committee on Oversight and Government Reform. "That is precisely the reason I was shocked because I'd been going for 40 years or more with very considerable evidence that it was working exceptionally well.''
Greenspan said he was ``partially'' wrong in opposing regulation of derivatives and acknowledged that financial institutions didn't protect shareholders and investments as well as he expected.
"We cannot expect perfection in any area where forecasting is required,'' he said. "We have to do our best but not expect infallibility or omniscience.''
Part of the problem was that the Fed's ability to forecast the economy's trajectory is an inexact science, he said.
"If we are right 60 percent of the time in forecasting, we are doing exceptionally well; that means we are wrong 40 percent of the time,'' Greenspan said. "Forecasting never gets to the point where it is 100 percent accurate.''
Discuss amongst your selves -- Greenspan: Bad FOMC Chair, or the Worst FOMC chair?
Greenspan Concedes to `Flaw' in His Market Ideology
Scott Lanman and Steve Matthews
Bloomberg, Oct. 23 2008