Blinder blinded to reality
Pity the econ students at Princeton studying under former Fed vice chairman Alan Blinder. For, judging by his column in the New York Times laying blame for the subprime meltdown, his students are learning nothing about the evils of an endlessly expanding money supply.
Blinder finds plenty of blame to go around. (“Because so much went wrong, the fingers on one hand will not be enough.”) There are the mortgage-holders who should have known better, the lenders who should have been more forthcoming about the risks, the regulators who either didn’t know or didn’t care, the investors in mortgage-backed securities, the investment banks that dreamed up the mortgage-backed securities, and the rating agencies operating under a conflict of interest.
All well and good. But the Fed gets off scot-free in Blinder’s analysis. The vast expansion of money and credit that lies at the root of the credit bubble goes unmentioned. But I grow tired of repeating myself.
Blinder also cites the late Fed Governor Ned Gramlich, “who saw the emerging subprime problems sooner and clearer than anyone.” Well, except for a few of my colleagues. And the late Dr. Richebacher.