He gave political support to the Bush tax cut in 2001 because --
get this -- unless the government reduced taxes, there would be no more Treasuries for the Fed to buy to conduct
monetary policy! He refused to raise margin requirements
in the late 1990s to defuse the technology stock bubble, arguing publicly it would
have no effect. (Privately, he acknowledged it would curtail the bubble
but might nail the economy in the process.)
It certainly is true we could have avoided this whole bubble by
clamping down on big banks and irrational lending. BUT.... would that
have just caused a similar economic crash earlier?
I think you can make a case that an earlier crash would have
been a "normal" recession, versus a Great Depression. And that Wall
Street wouldn't have made trillions during those intervening years, and
thus require plus-sized bailouts.
But, I don't know anyone who's even asking that question. In
other words, was it really possible to have brought the economy in for
a soft landing, or was as crash like this more-or-less inevitable, and
the best we could have done is to deliberately precipitate it?
If the latter is the case, then I have a bit more sympathy for
politicos who've blinked. Of course, if there was a way to have
stopped the excesses *before* they became a structural problem, then
that would've been much better. But how early would that intervention
had to have taken place -- 2001? 2005? And did anyone *else* see the
problem way back then?
That's the one caveat I have with all those (admittedly
much-deserved!) blame-flinging. Would the earlier cure have been as
painful as our current disease, when would it have to have been
implemented, and who truly knew back then?
To be sure, I do agree that there *were* valid warning signs
that were deliberately ignored. I just don't know if the signal to
noise was very high, and thus whether the crime was ignoring a strong
signal or failing to pay sufficient attention to a weak one. Which is
an important distinction if one is trying to redesign the system as a
whole to behave better, rather than just vilifying individuals.
Ernie P.
-- Ernie P.
