Thursday, October 23, 2008

NEWCAG missed the agency problem?

In another half-hearted attempt to pretend that he wasn't at the center of an Objectivist conspiracy to bring down the global economic system, NEWCAG
...told the House Oversight Committee that his belief that banks would be more prudent in their lending practices because of the need to protect their stockholders had been proven wrong by the current crisis. He called this a "mistake" in his views and said he had been shocked by that.

Greenspan said he had made a "mistake" in believing that banks in operating in their self-interest would be sufficient to protect their shareholders and the equity in their institutions.
So... he didn't get that banks are run by managers, and managers have primarily short-term interests -- they want big bonuses quarter by quarter, and want to pump, vest and dump their options. He just missed it.

You know how in letters to the editor, and in movies where people are advising policy makers, boring people say obvious things? Apparently, they're really necessary.

I saw W. last night, and it showed a bunch of people telling a policy maker just downright crazy things. Those people? Not so desirable. But, it looks like maybe it's useful to write tedious obvious letters to your governing officials. They apparently want you to believe they don't think things through.

1 comment:

Anonymous said...

Hey, apparently I have the same insights as professional journalists. From Steve Goldstein, WSJ London bureau chief:
The former Federal Reserve chairman is in full-frontal legacy defense mode, and he's not doing a particularly convincing job.