Three Blind Mice
I saw Alan Greenspan’s opening statement today at the House Oversight Committee, and I was happy to see a pretty chastened policymaker on display. But as Chairman Waxman suggested, one has to acknowledge that in at least some respects, the three bureaucrats testifying today (Greenspan, Cox, and Snow) were willfully blind to some obvious dangers in the credit markets:
Over and over again, ideology trumped governance. Our regulators became enablers rather than enforcers. Their trust in the wisdom of the markets was infinite. The mantra became: government regulation is wrong and the market is infallible.
Our focus today is financial regulation. But this deregulatory philosophy spread across government. It explains why lead got into our children’s toys and why evacuees from Hurricane Katrina were housed in trailers filled with formaldehyde. . . .
The Federal Reserve had the authority to stop the irresponsible lending practices that fueled the subprime mortgage market. But its long-time Chairman, Alan Greenspan, rejected pleas that he intervene. The SEC had the authority to insist on tighter standards for credit rating agencies. But it did nothing despite urgings from Congress. The Treasury Department could have led the charge for responsible oversight of financial derivatives. Instead, it joined the opposition.
Jacob Weisberg rounds up a list of these and other suspects–some of whom still today insist that the answer is to give the wealthy more tax cuts. Could Saramago’s Blindness be a metaphor for ideology resilient against all facts?
Fortunately, Michael Greenberger is asking the hard questions–and Wall Street historian Steve Fraser is demanding that we start insisting that our investment be directed to productive projects, not castles in the air that appear to generate little more than fee income for rich bankers and enormous risk for the rest of us.