. . . And Greenspan is to blame
Barry Ritholtz is the author of 'The Big Picture,' a very fine financial and economics blog. It can be found here. The following is his latest entry:
I have a short piece in Forbes, discussing the bailout culture, and how things devolved into the current mess:
The credit crunch. Bear Stearns. The housing crisis. Fannie Mae and Freddie Mac. And as of today, Lehman Brothers, Wachovia and possibly even such august firms like AIG and Merrill Lynch.
These are the bailouts of the past 12 months and the potential bailouts of the next 12 months. The U.S. is experiencing a set of financial crises unlike anything since the Great Depression. It has forced long-held ideologies to be closely re-examined, destroyed enormous amounts of wealth, quashed hundreds of thousands of jobs and ruined the reputations of corporate titans and former Fed chairs alike.
Wall Street is now scrambling, anticipating a sale of Lehman Brothers this weekend. It behooves the reader to consider how we got ourselves into this mess, what possible solutions there are to the current problems, and most important, how we can avoid finding ourselves in a similar situation in the future.
The current headache begins and ends with ideology, namely that of former Fed Chairman Alan Greenspan--an acolyte of Ayn Rand, a free-market absolutist, a true believer in the evils of regulation. Many of the present headaches point directly back to the decisions made by the Greenspan Fed. Sure, there is plenty of other blame to go around: an unengaged president, a clueless Congress, a hapless FDIC, a compromised OFHEO, and Phil Gramm--but the biggest and most accusatory finger points directly at Easy Al....
Its a short read, and you may find my conclusions provocative. Go read the whole thing (and be sure to give it a good rating!)
What is so surprising about this is that I am essentially calling out the economic neo-cons on their deregulatory jihad in one of the favored outlets for their rhetorical nonsense.
Here is a link to his Forbes article in its entirety.