Placing The Blame

I enjoy listening to classical music. The most convenient radio station for me is, sadly, WQXR, one owned by the parent of the People's Daily- The New York Times Corporation.

Thus, I awake to ultra-liberal radio news. This morning, it was the 'news' that a recent public opinion poll found Americans looking more darkly at the country's current situation, and blaming Ben Bernanke and the Fed for moving too slowly to cut interest rates.

This left me incredulous. Yesterday's post discussed the long, complex set of events that have led the US economy and financial markets to their current condition.

The varied and long-running consumer behaviors which led us to this point could hardly have been regulated, much less prevented, without stifling behavior more familiar in, say, the failed, discredited Soviet economy of old.

As I wrote here, in November, in response to a Henry Kaufman hand-wringing editorial in the Wall Street Journal, our financial system has endured many failures over the past decades, as innovation has delivered ever more convenience and value to consumers.

The current financial market troubles are fairly simple, not totally unexpected outcomes of greedy, supervised behaviors by firms themselves. That is, the regulators aren't the only parties who may have missed some of the behaviors.

Merrill Lynch, Citigroup, Morgan Stanley and Bear Stearns all possessed well-paid, intelligent, experienced and educated senior and middle managers. They knowingly took risks, and/or looked the other way at their own organizations' and employees' excesses.

This isn't just, or even, really, a failure of regulation.

Similarly, it's not a failure at the Fed, either.

As Neil Cavuto said the other night on Fox Business News, paraphrasing him,

'If we think we need this kind of Fed rate activity and Congressional stimulus when we're not in real economic trouble, decline or recession, what will we want if we really get into trouble?'

I think he's right. We're not in a dire economic recession. And, should we slip into one soon, it will likely be mild.

As I'm writing this, I hear Nancy Pelosi blathering about the stimulus package being patched together in Washington. It's probably a mistake, as Alan Reynolds noted recently in his Journal editorial.

Permanently lower tax rates and similar, lasting fiscal policies would have much more impact, now and longer term, than sprinkling a few hundred dollars each across lower-income voters.

It seems that our country, as investors and consumers, just whine a lot more, over less, than we used to. We're not even near the pain and difficulties of the mid-1970s. Remember wage and price controls, 'whip inflation now' buttons, and Jimmah's cardigan-clad fireside talks urging us to cut up our credit cards and turn down our thermostats?

We're not anywhere near that point now. Plus, we have much better tools- analytics, information, etc.- with which to assess the situation at the market, firm and governmental level.

If too much 'help' is doled out now, by Congress and the Fed, all we'll do is remove the moral hazard of excessively risky behavior on the part of financial firms, industrial companies, investors and consumers. That won't be a good thing.

To paraphrase the title of a movie in current release,

"There will be pain."

And there should be.