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Dr. Kalinda Rose Stevenson
Greenspan’s Folly: Why Lack of Regulation By The Federal Reserve Is The Root Cause Of The Current Financial Mess
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John McCain claims that Wall Street greed is responsible for the current financial mess behind the bank failures and the subprime mortgage debacle. Michael Hirsh has written a significant article that places the blame squarely on the refusal of the Federal Reserve under Alan Greenspan to use its regulatory authority.
“Who is mostly to blame for the biggest upheaval on Wall Street since the Great Crash? The disaster appears to have many fathers. “In a way, it’s the perfect crime: Who do you go after?” asks Jim Rokakis, the treasurer of Cuyahoga County in Ohio, one of a slew of state-level officials who saw the mess coming years ago but were ignored by the Feds. “If you arrest the mortgage brokers, how can you in good conscience not arrest the officers of the mortgage banks and the rating agencies?” Rokakis wonders. Ultimately, a big share of the blame lies with Wall Street CEOs who encouraged all this bad lending by packaging it into ever more complex securities, and then invested in it themselves by the billions. Indeed, the myth surrounding the subprime fallout is that no single player along the pipeline could have prevented what happened, including the giant investment banks that loaded their balance sheets with this dreck only to have it drag them into oblivion. “Everyone’s to blame, and no one’s to blame,” says financial expert Joseph Mason of Drexel University, summing up a common view of academia and in Washington.
I don’t buy it. Especially the idea that somehow the blame lies mainly with Wall Street’s greed, as John McCain reiterated the other day, saying we have to “fix” it. How do you fix greed? And let’s face it, left to its own devices, Wall Street has always operated on pure adrenalized greed, which is why financial manias and bubbles come and go and always will.”
“This mess is mostly a titanic failure of regulation. And the largest share of blame goes back to one man: Alan Greenspan. People mainly fault the former Fed chief, who once enjoyed a near-saintly reputation because of his reputed “feel” for market conditions, for ushering in an era of easy credit that accelerated the mortgage mania. But the much bigger problem was Greenspan’s Ayn Randian passion for regulatory minimalism.” Read the rest of “Greenspan’s Folly” here.
Dr. Kalinda Rose Stevenson
Discover how Federal Reserve interest rates determine how much money banks have available to fund your business and real estate projects in No Money Limits For Real Estate Investors. Visit NoMoneyLimits.com for your Free ”52 Heart of Money Insights.”
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