I’ve seen this sort of thing talked about at a few places, but my big question for right now is how this plan from Geithner is going to impact all the regional banks and players who didn’t play fast and loose.
And is there any movement to regulate all these areas that were heretofore unregulated? Yesterday on GPS, Spitzer seemed to claim there was no need for new regulations, which I found rather astonishing:
ZAKARIA: Was the regulation — was the regulatory regime in place strong enough? And I’m thinking particularly of the New York Fed, which was headed by Tim Geithner, of the SEC?
Where do you see the flaw having been over the last few years?
SPITZER: Here’s my answer to that. The regulatory system was structurally flawed, but that’s not why this happened.
After the last round of scandals — Enron, et al. — we passed Sarbanes-Oxley. And we said, aha, we’ve solved the problem. Now we have another set of scandals.
There are enough laws, enough regulations on the books for smart, aggressive regulators and prosecutors to make all the cases. What was missing was judgment. And you can’t legislate judgment. You can’t regulate judgment. Either the people who are the regulators will walk into a bank and say “Your leverage is too great. We are going to take actions to pull it back,” or “This type of investment is flawed,” or they won’t. You can’t pass a law that says, you must use sound judgment.
Bubbles have been there through history, through over-regulation and under-regulation. This is a question of judgment and of failure of judgment.
When I was attorney general, people said, “Oh, you’re using this crazy little statute,” the Martin Act in New York, “to bring all these cases.” The Martin Act had a simple anti-fraud provision. That’s all we used.
The federal government has exponentially more regulatory power than we did. What was lacking was the judgment, the tenacity, the desire to rein in a financial system that was spiraling out of control.
I sort of almost have the attitude and feeling that what is going to happen is going to happen, and there is not much we can do about it. What concerns me is that we at the very least try to stop this from happening again.
Also, Sullivan notes that Krugman is about as caustic towards Obama these days as he was towards Bush. I read several right-wing blogs over the weekend who seemed shocked to hear Krugman criticize “the One,” and I just had to laugh. Krugman has never been in the tank for Obama, was a Clinton supporter, and took shots at Obama all through the primary and basically was of the opinion that the choice was between Obama where there was some hope and the lost cause that was McCain/Palin. In other words, there wasn’t a choice at all. Hardly a ringing endorsement of Obama, and even Obama’s budget was met with a luke-warm endorsement from Krugman.
It remains amusing to me that all these guys hate Krugman, but seem to have no idea what he thinks.
*** Update ***
I stand corrected. Krugman saw some flaws in the budget, but overall said it was very good. It was the stimulus package he savaged at every opportunity. Regardless, the point remains. Krugman has been anything but in the tank for Obama.