Reich on the Choice Confronting Americans

Here is an excellent blog entry from Robert Reich laying out Greenspan's role in the financial crisis, the role of Congress, and the stark choice facing Americans. The whole article is worth reading. But for those for whom speed dial is too slow, here are the crucial bits...

On Greenspan:

Barely two months ago, when Greenspan appeared before Congress to explain what had happened to the economy, Representative Henry Waxman asked him pointedly: "Were you wrong?"

"Partially," Greenspan responded. "This crisis has turned out to be much broader than anything I could have imagined."

It might be argued that Alan Greenspan’s failure of imagination was not just about the scale of the crisis. More basically, his ideology had made it difficult for him to imagine what could happen when financial markets are left to themselves. He had supposed that the interplay of millions of self-seeking individuals would make government regulation unnecessary – except to prevent outright fraud or theft. To Greenspan and others like him, the global financial market represented the almost perfect form of the free market, because buyers and sellers were could gather almost unlimited information about one another, at almost instantaneous speed, at very low cost. Not only would the financial market be self-correcting, but it would automatically give us everything we might reasonably wish from it.

On the corruption of politics and the role of Congress:

During the same years Greenspan called for deregulation of financial markets, Wall Street was accelerating its bankrolling of the U.S. Congress. Securities and investment firms contributed larger and larger amounts of money – not just to conservative Republicans who might expect such support but also to Democrats who had never been so graced before. According to Center for Responsive Politics, Wall Street firms dramatically increased their contributions to both parties during these years. Their share of total donations to the Democratic Senatorial Campaign Committee, for example, rose continuously, from 5 percent during the 1999-2000 election cycle to 15 percent by the 2007-2008 cycle.

The money was accompanied, and often raised, by Wall Street lobbyists who pushed Congress in the same direction Greenspan urged – blocking regulation of derivatives, weakening oversight of subprime mortgage lending, and preventing the Securities and Exchange Commission from doing its job.

On the choice confronting Americans:

The real choice ahead is between democratic capitalism and authoritarian capitalism. China is perfecting the latter. But unless we are careful we – the citizens of democratic capitalist nations – will discover that our form of capitalism has become more authoritarian than democratic.