In light of the Citigroup meltdown, Rod brings up what’s on the mind of many of us:
OK, here’s what I don’t understand. Obama’s new economic team — Tim Geithner, Larry Summers and Peter Orszag — are all universally acclaimed as brilliant. But they are all proteges of former Clinton Treasury Secretary Robert Rubin, the Citigroup official who worked hard to break down the Depression-era firewalls that kept what’s happening now from happening, and who stood shoulder to shoulder with Alan Greenspan to keep the government from regulating new financial instruments that helped cause this meltdown. Why is nobody asking why men with this kind of past being put back in charge of US economic policy? It’s like a Republican president in 2016 bringing back Rumsfeld’s proteges to run national security.
I’m looking forward to how this is explained–if the question is ever properly raised….
Well, I suppose one might in part question Rod’s assumption that it was the “Depression-era firewalls” which kept this from happening before.
While the ability to spread mortgages around through securitization helped cause our current problems, I’m not really convinced that preventing that (something which has been going on since the 80s) would have prevented our current situation.
Yes, and it’s probably likely some of those ‘depression era’ firewalls were actually the later work of congresses–in the 60s and even 70s.
Rod’s been on a real regulation kick lately (You seen that column of his that caused a lot of recent controversy, wherein he stated that our big problem is “too much individual freedom”?).
I think in trying to assess this problem, we need to look at the big picture and ask, “What’s different now that wasn’t different before?”
Money lending wasn’t exactly invented yesterday. It’s been going on for a long time. In the past, money lenders have tended to not make bad, risky loans. What made so many of them, en masse, start making bad loans at once?
The typical liberal answer of “greed” isn’t helpful either. Greed has been around even longer than money lending. Usually, it’s just as good a reason *not* to make bad loans (presumably a greedy person wants their money back, after all).
For my part, I think it was mostly the fault of government interference that encouraged (or sometimes even came close to mandating) this sort of recklessness in recent years, and which provided an implicit promise of a nanny-state safety net should it all go bad (a promise being fulfilled with bailouts now that it has). I think that giving too-clever-by-half bureaucrats even *more* power to interfere is likely to have the exact opposite of the intended effect.
(You seen that column of his that caused a lot of recent controversy, wherein he stated that our big problem is “too much individual freedom”?).
Yes. Not going to go there right now.
🙂
But, as even Alec Baldwin pointed out (yes, that Alec Baldwin!), the Clintons bear no small responsibility for encouraging home ownership for precisely those people who could least afford it.