NPR brought on WSJ reporter David Wessel to talk about the state of the economy. When he was asked about whether the Fed's decision to lower interest rates might lead to another bubble, he said that economists learned that the problem wasn't the low interest rates, but that Greenspan kept them too low for too long. This was incredibly painful to hear. Which economist who was too dumb to see the bubble made this comment? The problem was that Greenspan chose to not target the housing bubble. He could have done so by presenting the evidence that there was a bubble with charts and papers. This changes the incentives for the people at Goldman Sachs and Citigroup peddling junk. The point is that the top executives are all saying "who could have known" right now, insisting that there was no way they could have seen the housing bubble and therefore should not be held responsible for nearly bankrupting their banks and costing their shareholders hundreds of billions. However, if Alan Greenspan had been extremely visible warning of the bubble and warning that Goldman and Citigroup and the rest would destroy their banks with their mortgage related loans, and these banks were in the current situation, then the executives would all be fired, and quite likely would face lawsuits from investors for failing to exercise their responsibilities as managers. David Wessel and the economists who missed the bubble may not agree with this assessment, but it's unlikely that they have a serious argument against it, just like they had not serious argument against the bubble. News outlets like Morning edition should try to present news, not the latest mantra among the fraternity of ill-informed economists.
--Dean Baker
