The GOP and Bush Administration Ignored Major Signs Of Financial Disaster
Since 2003, the incoming Obama Treasury Secretary has been president of the Federal Reserve in New York. He claims not to understand what caused the financial catastrophe that grips the country now.
Such a lame excuse gives one pause that Geithner is ignorant or negligent either of which is a concern.
Paul Krugman at The Times writes: "Some people say that the current crisis is unprecedented, but the truth is that there were plenty of precedents, some of them of very recent vintage. Yet these precedents were ignored. And the story of how “we” failed to see this coming has a clear policy implication — namely, that financial market reform should be pressed quickly, that it shouldn’t wait until the crisis is resolved.
"About those precedents: Why did so many observers dismiss the obvious signs of a housing bubble, even though the 1990s dot-com bubble was fresh in our memories?
"Why did so many people insist that our financial system was “resilient,” as Alan Greenspan put it, when in 1998 the collapse of a single hedge fund, Long-Term Capital Management, temporarily paralyzed credit markets around the world?
"Why did almost everyone believe in the omnipotence of the Federal Reserve when its counterpart, the Bank of Japan, spent a decade trying and failing to jump-start a stalled economy?
"One answer to these questions is that nobody likes a party pooper.. While the housing bubble was still inflating, lenders were making lots of money issuing mortgages to anyone who walked in the door; investment banks were making even more money repackaging those mortgages into shiny new securities; and money managers who booked big paper profits by buying those securities with borrowed funds looked like geniuses, and were paid accordingly. Who wanted to hear from dismal economists warning that the whole thing was, in effect, a giant Ponzi scheme?
"There’s also another reason the economic policy establishment failed to see the current crisis coming. The crises of the 1990s and the early years of this decade should have been seen as dire omens, as intimations of still worse troubles to come. But everyone was too busy celebrating our success in getting through those crises to notice.
"Now we’re in the midst of another crisis, the worst since the 1930s. For the moment, all eyes are on the immediate response to that crisis.. Will the Fed’s ever more aggressive efforts to unfreeze the credit markets finally start getting somewhere? Will the Obama administration’s fiscal stimulus turn output and employment around? (I’m still not sure, by the way, whether the economic team is thinking big enough.)
"And because we’re all so worried about the current crisis, it’s hard to focus on the longer-term issues — on reining in our out-of-control financial system, so as to prevent or at least limit the next crisis.. Yet the experience of the last decade suggests that we should be worrying about financial reform, above all regulating the “shadow banking system” at the heart of the current mess, sooner rather than later."
Read the rest of Krugman's piece to discover why there should be no excuses for this debacle.
No effective demands, accountability, or supervision were in place before the Bushites starting raining money on their crony perpetrators on Wall Street. These perps are still in charge and snarfing up the hundreds of billions of taxpayers' dollars being given away, with practically no strings attached, strong oversight or transparency.
With Geithner and Larry Summers, deregulatory supporters as major players on the Obama economic team, the major financial system reform that is required may be all show and no substance.
I agree with Krugman that the Obama team is not thinking big or boldly enough about the stimulus package.
Why select those like Summers and Geithner, rather than those who weren't part of the problem, sounded the alarm, and have the required vision and courage to overcome the disaster caused by this Republican, reactionary, criminal Bush regime and the greedy management of financial institutions and actually reform the financial system?
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