“Hindsight is always 20-20, but it’s clear the Fed should have acted earlier. Financial innovation is great, but you have to have some basic rules. One of the most basic rules is that a borrower should have the ability to repay.”
–Sheila C. Bair,chairman of the Federal Deposit Insurance Corporation
Back in August, I wrote a piece titled The Ongoing Impact of the Housing Sector. In that, I discussed all the many people responsible for the sub-prime housing crisis (which has subsequently led to the present credit crunch).
I singled out the Fed for two reasons: 1) taking rates down to ridiculous levels and leaving them there for too long, and 2) their failure to adequately perform their banking regulatory responsibilities when it came to the origination of mortgages.
Today’s page one NYT article covers the latter in grisly detail Fed and Regulators Shrugged as Subprime Crisis Spread. They single out Greenspan for his part in allowing unregulated problems to fester.
You can read the full article there, but here I wanted to emphasize the graphic:
courtesy of NYT
Download ginormous version: 2007subprime.jpg
As we have seen in oh so many different contexts, the blind adherence to dogma and ideology, from religious zealots to acolytes of Ayn Rand, seems to only lead to a broad range of problems, ranging from errors in judgment to unnecessary pain. Ultimately, most political and economic extremists collapse under the weight of their own slavish devotion to a universal idea that is inapplicable to a specific situation. Some people call this consistency, but the word "stupidity" means the same thing, and can be typed with less letters.
I’ll take a pragmatic technocrats over the syncophants, idiots and idealogues any day of the week . . .
Fed and Regulators Shrugged as Subprime Crisis Spread
EDMUND L. ANDREWS
NYT,December 18, 2007
The Ongoing Impact of the Housing Sector
Investors Insight, August 24, 2007