Krugman: The Dilbert Strategy

These are a couple of excerpt from a New York Times article by Krugman. It shows that the Bush administration has not fixed what caused the sub-prime crisis in the first place but simply adjusted the existing regulatory system.s

New York Times
March 31, 2008

The Dilbert Strategy
By PAUL KRUGMAN

Anyone who has worked in a large organization — or,
for that matter, reads the comic strip “Dilbert” — is
familiar with the “org chart” strategy. To hide their
lack of any actual ideas about what to do, managers
sometimes make a big show of rearranging the boxes and
lines that say who reports to whom.

[....]

Thus, in a draft of a speech to be delivered on
Monday, Henry Paulson, the Treasury secretary,
declares, “I do not believe it is fair or accurate to
blame our regulatory structure for the current
turmoil.”

And sure enough, according to the executive summary of
the new administration plan, regulation will be
limited to institutions that receive explicit federal
guarantees — that is, institutions that are already
regulated, and have not been the source of today’s
problems. As for the rest, it blithely declares that
“market discipline is the most effective tool to limit
systemic risk.”

The administration, then, has learned nothing from the
current crisis. Yet it needs, as a political matter,
to pretend to be doing something.

So the Treasury has, with great fanfare, announced —
you know what’s coming — its support for a
rearrangement of the boxes on the org chart. OCC, OTS,
and CFTC are out; PFRA and CBRA are in. Whatever.

Will rearranging these boxes make any difference? I’ve
been disappointed to see some news outlets report as
fact the administration’s cover story — the claim that
lack of coordination among regulatory agencies was an
important factor in our current problems.

The truth is that that’s not at all what happened. The
various regulators actually did quite well at acting
in a coordinated fashion. Unfortunately, they
coordinated in the wrong direction.

For example, there was a 2003 photo-op in which
officials from multiple agencies used pruning shears
and chainsaws to chop up stacks of banking
regulations. The occasion symbolized the shared
determination of Bush appointees to suspend adult
supervision just as the financial industry was
starting to run wild.

Oh, and the Bush administration actively blocked state
governments when they tried to protect families
against predatory lending.

So, will the administration’s plan succeed? I’m not
asking whether it will succeed in preventing future
financial crises — that’s not its purpose. The
question, instead, is whether it will succeed in
confusing the issue sufficiently to stand in the way
of real reform.

[....]

http://www.nytimes.com/2008/03/31/opinion/31krugman.html