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In hearing after hearing, nobody takes the blame for financial debacle

The more Washington holds hearings to assign responsibility to somebody — anybody — who sparked this nasty economic disaster, the more we end up with the same third-grade version of "it's not my fault."

The dog ate our financial system.

Welcome to the blameless debacle.

Volumes of largely self-serving testimony by dozens of congressional witnesses get catalogued by House and Senate committees probing the causes of our financial fiasco. There are occasional exceptions of lucid insight, but most who testify can be summarized as follows:

"It wasn't my job."

"I wasn't aware of any problems on my watch."

"Gee, I'm sorry. Can I go back to my limo and penthouse now?"

Three days of hearings last week by the Financial Crisis Inquiry Commission offer up the latest examples. Former Federal Reserve Chairman Alan Greenspan, too long deified in federal circles and in books like Maestro by D.C. insider Bob Woodward, arrived to testify on Capitol Hill. And once again, he deflected any personal blame for the housing bubble, credit crisis, runaway securitized subprime mortgage mess, and the resulting Wall Street implosion.

Instead, he wagged his shame-on-you finger at just about everyone else, from Congress, the Bush and Clinton administrations and Fannie Mae and Freddie Mac to the Europeans, other regulators, one of his Fed colleagues and even — hey, why not? — the fall of the Berlin Wall.

My favorite Greenspan line came when he acknowledged mistakes he made during his career about the virtue of unfettered free markets, but not about his role in the economic collapse.

"I was right 70 percent of the time, but I was wrong 30 percent of the time," he said, calling that an "exceptionally good" track record.

That's funny. Kids in schools who perform at 70 percent are barely holding on to a grade of C.

Not to pick only on Greenspan, though the Fed chief deserves to be less American Idol and more American Idle. The 20 people displayed with this column are just a few of the many folks who played some role in contributing to the United States nearly falling into a modern-day Great Depression. It would be easy to bump this list to 200, if we had room.

And that's the problem.

So many played their parts — in blithely letting Wall Street get hideously overleveraged; in Congress bending rules to appease special interests and campaign contributors; in U.S. presidents pursuing agendas without proper safeguards; and in ill-chosen regulators too eager to chill proper oversight. Don't forget our major banks, which, the Wall Street Journal reported Friday, masked their high-risk levels for more than a year by lowering their debt just before reporting it to the public.

Others contributed to our economic blunders — in executive pay so wildly out of touch with actual value; in a global economy exploding without international supervision; in a business press increasingly unprepared for its watchdog role in such a complex economy; and in an American culture hell-bent on celebrating luxury McMansion lifestyles and borrowing madly to do so.

In broader terms, last week's testimony was dominated by Greenspan and Citigroup alums Robert Rubin (Treasury secretary under Clinton) and Charles Prince. If Greenspan polished his own legacy, Rubin also denied any responsibility, despite being one of Citigroup's highest-paid officials.

And Prince? He was ousted as Citigroup CEO when the giant New York banking company started to falter. During Thursday's hearing, in which he was called a "lemming" for not controlling Citigroup's high-risk embrace of CDOs — or collateralized debt obligations — Prince did manage to say "I'm sorry" three times.

But he's no pauper. Prince is long gone from the banking scene, well insulated with a $100 million pay package. For what?

This trio is easy to identify as contributors to this mess we're in. But why put someone like Ronald Reagan on this list of 20? Because, for better or worse, Reagan's embrace of free markets during his presidency in the 1980s spawned a national culture of deregulation and minimal government. That mind-set influenced subsequent White House administrations to keep a light touch on Wall Street and industry, even as it became clear that tougher controls were required.

The law of unintended consequences landed actor Michael Douglas and author Michael Lewis on the list. Douglas won an Academy Award for playing Wall Street dirtbag Gordon Gekko in the 1987 Oliver Stone movie Wall Street, whose sequel is about to hit the theaters. The Gekko character, who went to prison in the movie, became not a crook but a hero among Wall Streeters.

Lewis, who once worked on Wall Street as a 20-something coming of age at the rough-and-tumble Salomon Bros. bond trading giant, wrote of his experience in the book Liar's Poker, named after a popular Wall Street game in which traders "bet" on the serial numbers on dollar bills they hold. Lewis says he's often told the book influenced many to pursue, rather than avoid, Wall Street careers.

Where are all these hearings and Washington's navel-gazing taking us? Not very far. Financial reform recommendations and legislation are still to be considered by Congress. But the watering-down and compromise process already is well under way.

When the federal government is not sure what it wants, whom to blame and how to actually improve the financial markets, it becomes all too easy for Wall Street and banking lobbyists to argue that little should really change.

The most telling remark about this nobody's-to-blame economic mess came from Phil Angelides, who chairs the Financial Crisis Inquiry Commission. He told Citigroup's Rubin at last week's hearing:

"I don't know that you can have it both ways. Either you were pulling the levers or asleep at the switch. Leadership and responsibility matter."

Sure sounds right. We grew up with such beliefs. But it somehow seems irrelevant when, after so many years, all we can conclude from our economic leaders is absolutely nothing is anybody's fault.

Robert Trigaux can be reached at [email protected]

In hearing after hearing, nobody takes the blame for financial debacle 04/10/10 [Last modified: Tuesday, April 13, 2010 4:15pm]
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