DC Still Turns Blind Eye to Banks: Spitzer

Regulators attempt to save face after failing to prevent crisis

By Kevin Spak,  Newser Staff

Posted Apr 1, 2009 11:38 AM CDT

(Newser) – There’s a reason the government seems to have no control—darn the luck—over the banks it’s poured billions into: It’s trying to save face, writes Eliot Spitzer for Slate. Washington has struck a tacit bargain with Wall Street, the ex-governor says: Taxpayers bail out the financial institutions, changing nothing about them, and in return banks “perpetuate the myth that regulators didn’t have enough power to prevent the meltdown.”

The truth is, regulators had all the power they needed. The ratings agencies, commercial banks, and investment banks that really wrecked the system are “squarely in Washington’s regulatory sweet spot.” But, seduced by the bubble economy, regulators did nothing. Now they’re asking for more power over hedge funds, as though that was the problem all along. It wasn’t. Then, as now, regulators simply refused to act.

Then-New York Gov. Elliot Spitzer announces his resignation as his wife Silda looks on Wednesday, March 12, 2008, in his offices in New York City.
Then-New York Gov. Elliot Spitzer announces his resignation as his wife Silda looks on Wednesday, March 12, 2008, in his offices in New York City.   (AP Photo/Stephen Chernin)
Lloyd Blankfein, right, CEO of Goldman Sachs, leaves the New York Stock Exchange after attending a panel discussion Friday, Oct. 10, 2008 in New York.
Lloyd Blankfein, right, CEO of Goldman Sachs, leaves the New York Stock Exchange after attending a panel discussion Friday, Oct. 10, 2008 in New York.   (AP Photo/Mark Lennihan)
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The story is now well told that, from Alan Greenspan and Timothy Geithner at the Fed to Robert Rubin and Larry Summers at Treasury, to Harvey Pitt and Chris Cox at the SEC, regulators avoided the critical issues. - Elliot Spitzer

In return for the free money, the financial-service companies only have to play along with the face-saving myth: The regulators would have done better if only they had had more power.
- Eliot Spitzer

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