Monday, November 17, 2008

Reversals of Fortune

Elliot Spitzer broke his year long silence in the Washington Post over the weekend, with an excellent op-ed on the financial follies that have unfolded since his personal follies exploded, offering a cogent analysis of what when wrong, and what will be needed to correct it. Certainly Elliot Spitzer’s tenure as attorney-general and governor are looking better and better in retrospect. His downfall was applauded by his many enemies on Wall Street (and for some conspiratorial minded persons, perhaps in some way aided or abetting by strategic leaks by Wall Street people in the know.) At the time of his downfall, last March, some speculated that the growing financial crisis Spitzer’s fault (his investigations had damaged Wall Street precious “liquidity” ), though this never made any sense, and if anything his effort to rein in deceptive and unsafe practices at bailed out insurance giant A.I.G were not searching and hard hitting enough. His voice was ultimately a lone one, crying in the wilderness, against the voices, Democrat as well as Republican, that tried to stop anyone from getting too close to the golden-egg laying goose. This should have been his time, his hour, his vindication. He has been missed, and if Spitzer’s op-ed was an effort by his to angle for the SEC chairmanship and his redemption, he gets my vote.

Meanwhile in the Times today was an interview with the man most responsible for the financial crisis we face today, former Senator Phil Gramm, who has left the senate to porkily enjoy Wall Street lucre. For fifteen years, from the late 1980s through about 2000, Gramm spearheaded congressional efforts to free financial institutions from sensible oversight. From the S & L crisis, when the ability of mortgage derivates to wreak havoc was amply demonstrated, to his successful effort to prevent the Commodities Future Trading Commission (headed for a while by his wife) to regulate derivatives, to his overturning of Glass-Steagall in 1999, no one played a bigger role in encouraging our financial services to engage in greedy, irresponsible behavior, and to encourage our regulatory bodies to look elsewhere. Gramm tries lamely to defend himself, arguing that deregulation was not at the heart of what has gone wrong, but it will convince few. (Even Gramm acknowledges in the interview that there might be a need for greater regulative scrutiny from here on out.) All in all, if I were worrying about my legacy, and how I will be viewed by historians, I would rather be Elliot Spitzer than Phil Gramm.

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