Posted by AzBlueMeanie:
The Rachel Maddow Show had the best reporting on the testimony of Harry Markopolos, because Rachel included an explanation of how we got here in the first place with Nobel Prize winning economist Paul Krugman.
MADDOW: The Madoff whistleblower today, Mr. Markopolos. He said today that the SEC, the Securities and Exchange Commission, essentially would lose in a math contest with Mr. Ed. He described them as completely feckless. Is regulation in the financial industry really that lame?
KRUGMAN: It`s pretty bad. You know, it`s not — if you spent 30 years saying that government is always the problem never the solution, if you spent 30 years castigating government bureaucrats, you know, many of whom are actually — we need bureaucrats — and if you under-fund these agencies, if you make government the place where smart people don`t go, because, hey, it`s got bad rep and furthermore, it pays so much less than being on Wall Street, being a malefactor of great wealth, then you have to expect that the whole apparatus is not going to work.
So, in the case of the SEC, they had the authority, the rules were there, but we had degraded, you know we FEMA-fied it, we`ve degraded so much that it couldn`t do its job.
MADDOW: When did that degrading start?
KRUGMAN: Oh, it really goes back to Ronald Reagan. And you really want to — this began in 1981, and it`s taken place over the years. And while there was some improvement during the Clinton years, Clinton didn`t have Congress on his side and wasn`t able to make the kind of break in that trend. So, really we had, it`s almost 30 years now of degrading these things, and eventually, these are the consequences.
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MADDOW: If the stimulus happens, he kills the tax cut folly that could screw up that plan, what should be next on the agenda, in your opinion?
KRUGMAN: Well, financial rescue. That`s the other thing. You know, we do — we are busy constraining the paychecks to these executives but we actually, meanwhile, have a failing banking system and, you know, the new administration has not been very good at coming out with a plan that makes sense to anybody. And they need to do that.
So, I mean, the immediate thing is we have stop this freefall in the financial system and the economy. Stimulus bill takes care to some extent — I don`t think it`s big enough — but it takes care of the demand side, but we need to work on the financial side. And we also then have to do reregulation of the financial markets which we need to do while the crisis is still fresh in our minds. We don`t wait until everything is fine before trying to do fix it because at that point, the industry lobbyists will make sure that nothing happens.
MADDOW: So, big stimulus, clearly explained, well thought out financial system retrenching and rescue.