The Economy Will Not Recover until the Perpetrators of Our Crises Are Held Accountable

Anyone who believes that a risk regulator would have challenged the great Greenspan knows nothing about the way Washington works. The government is run by people who first and foremost want to advance their careers.

And, the best way to advance your career in Washington is to go along with what everyone else is saying. If that was not completely obvious before the collapse of the housing bubble, it certainly should be obvious now.

How many people in government have lost their jobs because they failed to see the bubble? How many people even missed a promotion? In fact, the top financial officials in the Obama administration, without exception, completely missed the housing bubble. One might think it was a job requirement.

This lack of accountability among economists and economic analysts is the core problem that must be tackled. Unless these people are held accountable for their failures in the same way as custodians and dishwashers, there will never be any incentive to buck the crowd and point out looming disasters like the housing bubble.

The reality is that we have a systematic risk regulator. It is called the Federal Reserve Board. They blew it completely. We will do far more to prevent the next crisis by holding our current risk regulator accountable for its failure (fire people) than by pretending that we somehow had a gap in our regulatory structure and creating another worthless bureaucracy.

Remember also that the Wharton study pointed out that "the public, expecting to be protected from such abuse, has suffered a trauma of loss similar to that after 9/11."

Indeed, the government's responses to both crises have been similar:

• After 9/11, no one was held accountable for something that - at the very least - should have been prevented
  

• Instead, a new super-bureaucracy was created (the Department of Homeland Security), just as some super-risk-regulator is now being proposed for the economy
  

• And as with 9/11, the government is creating a commission which will be sure not to "assign blame"

As the Wharton essay says, the economy will not recover until the perpetrators of our crises are held accountable. But - unfortunately - the government is doing everything possible to avoid holding anyone accountable.

This is what I've been saying for a long time.