As I wrap up some loose ends going into the long holiday weekend, I noticed that we have not commented here yet on last week’s partisan jousting over who is to blame for the financial mess we find ourselves in.
Republican Rep. Kevin Brady of Texas blamed Treasury Secretary Timothy Geithner for a major role in creating the problem when he was the president of the New York Federal Reserve Bank. Mr. Geithner shot back, ”What I can’t take responsibility is for the legacy of crises you’ve bequeathed this country.”
I can only assume that Brady was referring to Geithner’s backing of bailouts going back to Bear Stearns but he could have meant Geithner not working to rescue Lehman Bros. I also assume Geithner’s retort referred to the profligate spending of the Republican Congress when they where in the majority from 2001-2007. But who knows.
I am not surprised it has come down to a he said/she said shouting match. Like little children our political leaders point fingers at their siblings and can’t take responsibility for their short sided decisions.
They are probably both right. I have held a negative view of Geithner ever since he and Fed Chariman Ben Bernanke laughed off the notion of moral hazard at hearings following the Bear Stearns bailout. I can’t find the exact quote but he basically said, nobody would follow the example of the executives at Bear Stearns so there is not much risk of moral hazard. However the sweetheart deal for JP Morgan brokered by the Fed and Treasury allowed senior officials to retain multi-million dollar bonuses. Would you take outsized risk if your worst case scenario was that you would be given a multi-million dollars golden parachute? And I find it hard to stomach the new found fiscal responsibility by House Republicans. For my entire adult like I was hearing warnings about the dire consequences of our growing deficit. Yet at the turn of this century we actually had something resembling a balanced budget and it was simply tossed aside by the previous administration and the Republican Congress.
In a recent speech CME Group Chairman Emeritus Leo Melamed did better job in assessing blame.
Happy Thanksgiving.
