The financial crisis was underway when I got an email on March 30, 2009, suggesting that had I been in charge, the crisis would have been entirely avoided. I replied that day:

Just for fun, I decided to analyze your comment … I, like Greenspan, but unlike Rubin and Summers, supported privatizing and opposed government policies toward Fannie Mae and Freddie Mac at the time (1990s until the middle of the last decade), though to no avail. But, like Greenspan, Bernanke, and Geithner, though unlike Yellen, in this decade I missed the sharp relaxation of standards for sub-prime and Alt-A housing loans and the disastrous consequences of massive securitization. Unlike Rubin, Summers, Geithner, and Greenspan, but like Volcker, I opposed at the time (1999) the relaxation of Glass-Steagall in Gramm-Leach-Bliley that allowed the merging of commercial and investment banking but still didn’t give investment banks access to the Fed’s discount window. Unlike Greenspan, Bernanke, Geithner, and Yellen, I opposed at the time the Fed’s pre-commitment to low short rates after the summer of 2003 that contributed to the housing bubble, partly by keeping long rates down at first and then from rising when the Fed’s tightening started in mid-2004. Unlike Paulson, Geithner, and Bernanke, but like Volcker, I opposed at the time (March 2008) the Fed’s taking over $30 billion of Bear Stearns’s assets so JPMorgan could buy it more safely. Later on (September 2008), that decision kept any private buyers from purchasing Lehman without, according to Paulson’s dictum, government aid, and Lehman’s resultant bankruptcy was the proximate, though not the ultimate, cause of the current crisis. I conclude that, had I been in charge all along, the crisis would have been reduced only by about one third! I am forced to admit that even my hypothetical influence is far smaller than I realized.

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© 2016 David E. Lindsey

Policies and ethics