Dean Baker Checks his Crystal Ball

Here's Dean Baker in a posting on his blog looking back to history-as-it-might-have-been. I've bolded key bits:

To see this point, let's run history backward. Suppose Alan Greenspan had been the official "systemic risk regulator" in the years from 2002-2006, as the housing bubble was growing out of control. Instead of saying that there is no housing bubble and that there is nothing to worry about, would systemic risk regulator Alan Greenspan have said: "oh my god, there is a huge housing bubble and when it crashes it will sink the economy"?

That doesn't seem very plausible. We could have given Greenspan any title we wanted, but it is unlikely that it would have affected his conduct. If we want regulators to prevent something like the disaster we are now experiencing it is necessary to sanction them when they fail, for example by firing them. However, no regulator was fired for failing to prevent the most massive economic crisis since the Great Depression. In fact, Ben Bernanke, the person most responsible for this disaster, after Alan Greenspan, was just reappointed as Fed chairman to near universal praise.

If regulators suffer no career consequence for even the most massive failure, then they have no incentive to ever buck the financial industry, since they will face career risks from challenging powerful actors in the financial industry. This failure to hold regulators accountable virtually guarantees future crises. People who understand economics know this.

As George Santayana said "Those who cannot remember the past are condemned to repeat it." But Dean Baker goes this one better: "Those who are given a title and a government badge then sent back to re-live their past life won't change their behaviour if the incentives don't change."

It is peculiar. The Obama administration doesn't want to revisit the past. They don't want to look at the Bush torture decisions. They don't want to revisit financial decisions. They don't want to hold commissions on failure of public policy. They don't want to investigate vote rigging. They don't want to look into corporate corruption and lobbyists buying votes. They don't want to review military policy.

Instead, Obama believes in a feckless "fresh start", a sort of Ground Hog Day where every morning you get up and it is a fresh new beginning... of the very same day.

If you don't learn the lessons of the past, you will keep stepping in the same doo-doo and keep getting that same sickly sticky smell all over you. Maybe someday Obama will recognize this sad little fact.