Wikinvest Wire

Nouriel Roubini blames the Fed

Wednesday, October 29, 2008

Nouriel Roubini is everywhere! You have to wonder if he's starting to make odd requests for his media appearances like asking for a bowl of M&Ms with one color removed.

Last night, he was on the Nightly Business Report and was asked a very simple question, "Who or what is the major culprit of this financial crisis?" Here's his simple reply:

First of all the Fed kept interest rates too low for too long and created the housing bubble. Secondly the Fed and the other regulators were asleep at the wheel and allowed all these toxic mortgages to be created without controlling it. Three, there was plenty of greed and excessive risk taking on Wall Street. And four, the rating agencies had major conflicts of interest because they were being paid by those that were supposed to be rating. So the blame is to be shared by many different culprits.
It is quite clear there is plenty of blame to go around but, interestingly, the first two of the four culprits mentioned by the world's most in-demand economist were the Federal Reserve.

The entire transcript is available here.

The New York University economics professor and founder of RGE Monitor (how does he find time to teach these days?) was also on Bloomberg video this morning predicting a very long and painful recession dead ahead.
IMAGEClick to play in a new window

This simple search on "Roubini" at Bloomberg shows the extent of Nouriel's omnipresence - a total of ten references in just the last few days.

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fish said...


Do you think the public will ever recognize Greenspan as the Chance the Gardener (or Chauncy Gardiner if you prefer) of finance?

AJ said...

No one thing "caused" the credit crisis. It took many actors working in concert to screw our economy up. Instead, people should be asking "did xyz CONTRIBUTE to the credit crisis?" Here is my attempt at a comprehensive list of who shares blame and why.

Borrowers who foolishly trusted their broker, or purposely took advantage of the speculative boom and cheap credit. Brokers for lying and fraud. Banks for failing to do due diligence, or just not caring because they were never going to be on the hook for the loan after selling it. Wall Street investment banks, for being willing to buy the bad loans. Fannie and Freddie, for succumbing to pressure in 2004 to start buying the bad loans, lest the banks bypass them and go straight to Wall Street. Countless other Wall Streeters who sliced and diced the debt, hiding it behind complex financial instruments. Other Wall Streeters who would take bad debt and slice it up again, and the ratings agencies who labeled some of this bad debt to be as good as gold. Still others who sold insurance on these deals, thinking that they could never go south, and then re-sold these insurance deals again and again in a completely unregulated market by disingenuously labeling them "swaps". Computer algorithms that did not properly take into account the risks involved. Foolish investors who dumped too much money into the market because the prime interest rate was so low that they couldn't get a decent yield with most other instruments. More foolish investors who didn't perform due diligence on yields that were really too good to be true. Companies and individuals that were over-leveraged in an attempt to seek maximum profit despite any risk. Governments who chose not to regulate or enforce contracts or standards like rational minimum capital requirements.

Anonymous said...

I get it ---- rock star, Van Halen, contract rider to have brown M&Ms removed:

Tim said...

Thanks anon - I added a link.
Chauncey Gardiner - maybe...

From Wikipedia:

Peter Sellers as Chauncey "Chance" Gardiner: a simple gardener who has spent his entire life isolated from the world. Chance's calm and seemingly highly intelligent demeanor is essentially a blank canvas on which each of the film's characters paint their own picture, sometimes making Chance out to be much more than he really is.

Anonymous said...

You could also ask: Who had the power to stop it, but did not act?

Anonymous said...

Chance the gardner was a Christ figure - in the innocent and child-like sense. I don't think Greenspan qualifies.

Anonymous said...

Everyone who votes had the power to stop it. Pickpockets and thieves are a fact of life. Just realize that the primary function of government is to steal from you.

"Democracy is the theory that the common people know what they want, and deserve to get it good and hard."

fish said...

Chance the gardner was a Christ figure - in the innocent and child-like sense. I don't think Greenspan qualifies.

Perhaps Anon....or is this another example of the film's characters painting their own picture, sometimes making Chance out to be much more than he really is?

True, there was that whole walking on water at the end of the film thing so I guess I have to give you that one.

Greenspans legacy currently includes no water walking of any kind!

Chuck Ponzi said...


Nouriel Roubini Blames the Fed.

In other news,

Water is Wet, Says Local Expert

I'd like to see someone take the other side of that trade.

Anonymous said...

@fish. That last scene in Being There has to be one of the all time greats for me. How one perceives Chance is a reflection of oneself. He is simple and decent and a crack up. The characters in the film either draw strength from what they see or are threatened by it.

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