Failure of Bank Regulation

The legacy of George W. Bush is the financial crisis. He created this through his worship of free markets and deregulation. Here's a bit from a NY Times article by Eric Dash that looks at the failure of bank regulation. It was deep, widespread, and prolonged. All the consequence of an ideology that worshipped unrestrained capitalism the relegated government a role as observer instead of the institution of the society that governs, i.e. makes and enforces the rules. Instead, the ideology of Alan Greenspan et al. was that the rich would make their own rules and that 'greed is good' and unrestrained, unregulated greed is even better...

At bank after bank, the examiners are discovering that state and federal regulators knew lenders were engaging in hazardous business practices but failed to act until it was too late. At Haven Trust, for instance, regulators raised alarms about lax lending standards, poor risk controls and a buildup of potentially dangerous loans to the boom-and-bust building industry. Despite the warnings — made as far back as 2002 — neither the bank’s management nor the regulators took action. Similar stories played out at small and midsize lenders from Maryland to California.

What went wrong? In many instances, the financial overseers failed to act quickly and forcefully to rein in runaway banks, according to reports compiled by the inspectors general of the four major federal banking regulators. Together, they have completed 41 inquests and have 75 more in the works.

Current and former banking regulators acknowledge that they should have been more vigilant.

The economic calamity that the US has inflicted on the world comes from a massive failure of ethics. And the sad fact is that the majority of Americans still worship at the feet of the false god of unrestrained capitalism and a me-first greed. Sad.