My friends have to put up with my complaints that Brits think Americans are incapable of irony when, in reality, we are world class. Further proof of our preeminence in the irony department comes in the last five days from Geithner and Greenspan. The G2 are locked in a competition for droll humor. Today, in prepared remarks – he didn’t make some impromptu slip – he told Americans that when it comes to financial regulatory reform:
Listen less to those whose judgments brought us this crisis. Listen less to those who told us all they were the masters of noble financial innovation and sophisticated risk management.
Because I took his advice to heart I stopped reading his prepared remarks at that point and cannot report to you on the remainder of the regulatory advice given by an exemplar of “those whose judgments brought us this crisis.” The gentle reader will recall that Geithner testified to Congress that he had never been a regulator. True, but you’re not supposed to admit it. Your job statement required you to be a regulator and protect the public. Geithner’s advice means that we should all stop listening to Rubin, Summers, Greenspan, Bernanke, Gramm, Dodd, Patrick Parkinson (the Fed’s anti-supervisor), Dugan (OCC), Bowman (OTS), and Mary Shapiro (SEC). Thank you Mr. Geithner! Your advice is incredibly liberating.
Moreover, the Geithner corollary is that we should listen more to those that warned that war on regulation was producing an epidemic of fraud, a massive bubble, and an economic crisis. I trust that similar calls will be coming any minute to Ed Gray, Mike Patriarca, and our colleagues that led the successful reregulation of the S&L industry and prevented the S&L debacle from causing a recession (much less a Great Recession). Geithner’s novel idea that we should take our regulatory advice from regulators with a track record of success, courage, and integrity hasn’t been tried in over a decade.
Greenspan’s entry into the irony sweepstakes was a paper entitled “The Crisis” in which he purported to give advice about financial regulation. Seriously! The man that Charles Keating, the most infamous S&L fraud, used as a lobbyist to troll the Senate office buildings to recruit the infamous “Keating Five,” who wrote that Keating’s Lincoln Savings posed “no foreseeable risk of loss” (it turned to be the most expensive failure), and who praised the types of investments that Lincoln Savings’ (unlawfully) made that caused its catastrophic failure – all this before he became Fed Chairman – went on to become the leading anti-regulator that ignored copious warnings of the bubble and the “epidemic” of mortgage fraud to produce the environment that caused the Great Recession. Greenspan giving advice on regulation is standup at its finest.