The head of the FDIC, Shelia Baird said in her congressional testimony yesterday that "much of the crisis may have been prevented" had the Fed dealt with subprime mortgages seven years before it did. As you know, that it is my view as well, and as you recall Fed Chairman Bernanke said the same things a few days ago. Of course he didn't blame the failure to take action to rein in subprime mortgages on the Fed. Not sure who he blamed.
This "exchange" by regulators may be even more instructive than their joint determination that subprime lending was the spark that set off the financial crisis which in turn has lead to the real recession we find ourselves still in.
In baseball we call that the Old Alphonse Gaston Act. Meaning each outfielder thought the other outfielder was going to catch the ball, but neither did. It sounds like Bair and Bernanke ( and Schiller) agreed on the cause, they just thought the other (or someone else) was supposed to "catch the ball". If regulatory reform is needed maybe we should start there.
Eric
Eric:
ReplyDeleteI like your use of a baseball analogy here, but perhaps there is a more appropriate form. Regulators are merely enforcers of financial legislation and more frequently financial regulations derived from the legislation. Umpires/regulators do not play the game, and hence have no game plan, no goals and strategy, and only try to keep some sense of order and fairness and perhaps safety within the rules. Someone else has decided there are three outs per inning, nine innings, and how you score runs and can win...in other words have structured the game. Our financial game is structured so that the regulators/umpires do not know if they are regulating baseball or some other game. You have players playing baseball, hockey, extreme technical climbing, and poker, or just about anything found on ESPN. That is what does not make sense to me, and umpires are not the sort to stay up with it. Marc