Conservatives have been desperately trying to shift responsibility for the spiraling economic crisis away from its root cause: a bankrupt governing philosophy that shreds regulations and neglects vital supervision.
But there are a few individuals more responsible than most. A new site, How Did This Happen, a joint product of the Center for American Progress Action Fund and Media Matters Action Network, has identified six villains of the crisis.
Here are two:
Former Sen. Phil Gramm (R-TX)
Gramm is a former Republican senator from Texas who now serves a vice chairman of the UBS investment bank. He served as a senior economic advisor to Sen. John McCain (R-AZ) until October when he stepped down after calling America a “nation of whiners” experiencing a “mental recession.”
While still in the Senate, Gramm shielded derivatives from financial regulatory oversight, slipping a rule into an unrelated budget bill in 2000. The unregulated credit default swap market reached a peak of $62 trillion and contributed to the collapses of Bear Stearns Cos., Lehman Brothers Holding Inc., and the American International Group Inc. in recent months.
Alan Greenspan, Federal Reserve System
As chairman of the board of governors of the Federal Reserve System, Greenspan allowed the markets to run wild without proper supervision, a radical free-market ideology exemplified by a 2005 speech when he said “private regulation generally has proved far better at constraining excessive risk-taking than has government regulation.” He resisted the farsighted recommendation of fellow Fed governor Ned Gramlich that the Fed act to prevent some abuses predatory and risky practices in subprime mortgages, such as mortgages issued without verifying the borrower’s income or ability to repay the mortgage once the introductory rate expired.
Greenspan also opposed a voluntary code of conduct for mortgage lenders. Greenspan also led efforts to exempt derivatives legislation from the oversight BY the Commodity Futures Trading Commission, despite the clear threat to the financial system posed by the near-collapse of the hedge fund Long Term Capital Management due partly to disastrous bets on derivatives.
He now regrets his deregulatory stance. Testifying before the House Government Oversight Committee on October 23rd he explained that he “made a mistake” and had “found a flaw” in his free market ideology.
Read about all six here.