Friday, March 27, 2009

When market realities are out in the open

Here is what US Treasury Secretary Timothy Geithner said on Thursday March 26th about the US economy as it gestated the great financial crash of 2008:

"The system proved too unstable and fragile, subject to significant crises every few years, periodic booms in real estate markets and in credit, followed by busts and contraction. Innovation and complexity overwhelmed the checks and balances in the system. Compensation practices rewarded short-term profits over long-term return. We saw huge gains in increased access to credit for large parts of the American economy, but those gains were overshadowed by pervasive failures in consumer protection, leaving many Americans with obligations they did not understand and could not sustain. The huge apparent returns to financial activity attracted fraud on a dramatic scale. Large amounts of leverage and risk were created both within and outside the regulated part of the financial system. These failures have caused a great loss of confidence in the basic fabric of our financial system, a system that over time has been a tremendous asset for the American economy."

This is an indictment of an economic system, not praise for a relentless free market profit-taking.

1 comment:

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