A Teachable Moment

http://www.nytimes.com/2010/12/17/opinion/17krugman.html?_r=1&src=ISMR_HP_LO_MST_FB

Paul Krugman, who sometimes politicizes too much for me, provides us with a perspective this week that answers some questions many of us have on what's being learned about why the worldwide financial crisis happened in the first place. In his words, this should be a "teachable moment."

Nouriel Roubini's book (co-written with Stephen Mihm), "Crisis Economics" is the best book written on the subject of what happened, why it happened and what could happen in the future.

Back to Krugman: the Financial Crisis Inquiry Commission was established by law to "...examine the causes, domestic and global, of the financial ... crisis in the U.S."

However; the commission has broken down along partisan lines, unable to agree on some of the most basic points.

If we've read anything intelligent about the crisis (Roubini, or elsewhere), we know what happened and we don't want it to happen again. Krugman points out that the four Republican members of the commission "... voted to exclude the following terms from the report: deregulation, shadow banking, interconnection, and even Wall Street."

When Democratic members of the commission refused to go along with this, the Republicans issued their own report which didn't use any of the "banned" terms. The Republican story is that the crisis was the fault of "government do-gooders." This would include government-sponsored loan-guarantee agencies.

We won't dignify the extent of the Republican scenario but we find ourselves disappointed that, even on an issue as serious as this one, both sides can't agree on a single narrative about what happened and why it needs to not happen again. And, this is just Congress "defining" it! Dodd-Frank is the law created to deal with the issues.

Krugman is basically saying that the Republicans are just carrying the water for the Conservative approach that absolves the banks of any wrongdoing.

We don't like to talk about politics here but we have to occasionally bow to Krugman's judgment that there aren't any real bi-partisan approaches in today's politics. So, those of us who grew up being told that we have a pluralistic society and that that was "good" because everybody gets represented, find that things don't work the way they were supposed to and that's bad for business, regulation and the economy overall.

So, as Krugman says, the "teachable moment" from the crisis is that when an ideology backed by vast wealth and immense power confronts inconvenient facts, "the facts lose."