On Wednesday, March 10, a Wall Street Journal article announced that the Financial Crisis Panel will be convened in early April with Alan Greenspan as the center act. According to the article, “The hearing will focus on the explosion of subprime mortgages, and the complex securitizations that Wall Street engineered from those loans. And it will examine the role of government-sponsored mortgage companies Fannie Mae and Freddie Mac.”
The hearing should be an interesting show. How serious will such a panel be about finding the real causes of the financial crisis? My guess would be not very. Thus far, the blame has almost unilaterally been laid at the feet of banks and Wall Street. It is not in the nature of government to admit its own mistakes. Far better is the tactic of spreading blame around to those whose futures do not rest on the next election. (Although a good case could be made for saying that many CEOs’ futures do in fact rest upon the next election in times like these.)
Sadly, until proven wrong, I will have to assume that this upcoming event will be one more way of “clearing the Fed” of responsibility. Perhaps the panel will even pawn off some of the blame on Fannie Mae and Freddie Mac, but I have strong doubts as to whether the Fed’s reckless interest rate targeting will be exposed as anything more than a good economic stimulus tactic. As always, it is the game of politics that will take precedent over true learning.
I believe it was Theodore Roosevelt who quoted, “In any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing.” This motto has found a home in economic policy, and since most times the right thing for the government or the Fed to do is nothing, we usually find them doing the wrong thing. At least there is always the free market and the “greed of the businessman” to lay blame upon. It has worked so far, so I’m sure it will work again come April.
Sound Money Fellow
Atlas Economic Research Foundation