In his column titled An Irish Mirror, Paul Krugman notes “the most striking similarity between Ireland and America was “regulatory imprudence”: the people charged with keeping banks safe didn’t do their jobs.” (emphasis mine)
The phrase “regulatory imprudence” is far to imprecise — and wimpy — to describe what took place. Imprudent, as defined by Merriam Webster, is “lacking discretion, wisdom, or good judgment.” (Imprudence is the “state of being imprudent”).
If the Fed was only guilty of bad judgment or lack of wisdom, we could live with that. After all, people are fallible and judgment can go awry.
But that was not what occurred; rather, under Alan Greenspan, the Fed was guilty of Nonfeasance.
According to West’s Encyclopedia of Law, the definition of nonfeasance is far harsher: It is the intentional failure to perform a required duty or obligation.
When Greenspan made the decision to not regulate or oversee non-bank lenders, his choice was nonfeasance. He chose not to do something that he was bound to do as part of his official duty. (In common law, this was punishable by fines or imprisonment or both).
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