A Voice of Sanity in the Wilderness

September 24, 2009 at 10:52 am (By Amba) (, , )

Paul Volcker has always stood out, not only because he’s so tall, but because he is so disinterested, in the original meaning of the word.  He has never seemed a political animal, and therefore his mind rings like a good bell in the murk.

Evidently he’s no longer considered a playa, and so his testimony this morning in front of the House Financial Services Committee was carried only on the House website, with terrible sound.  None of the cable networks carried it, excerpted it, or even mentioned it, according to Icepick, who was looking for it.  People are having much too good a time perpetuating their delusions and addictions.

However, Calculated Risk printed some excerpts, and linked to Volcker’s whole prepared statement (PDF).  Just a taste:

Now the financial pressures have eased and there are signs of renewed economic growth. There are some on “Wall Street” who would like to return to ”business as usual”.   After all, for a time, and for some that system was enormously remunerative. However, it placed at risk not only the American economy, but also large parts of the world economy. […]

However well justified in terms of dealing with the extreme threats to the financial system in the midst of crisis, the emergency actions of the Federal Reserve, the Treasury, and ultimately the Congress to protect the viability of particular institutions – their bond holders and to some extent even their stockholders – have inevitably left an indelible mark on attitudes and behavior patterns of market participants. […]

Will not the pattern of protection for the largest banks and their holding companies tend to encourage greater risk-taking, including active participation in volatile capital markets, especially when compensation practices so greatly reward short-term success? […]

The obvious danger is that with the passage of time, risk-taking will be encouraged and efforts at prudential restraint will be resisted. Ultimately, the possibility of further crises – even greater crises – will increase.

Don’t just listen to the content, listen to the tone:  deliberate, thoughtful, unexaggerating, unhysterical.  You won’t hear its like again anytime soon, possibly not in your lifetime, possibly not in the rest of our civilization’s life cycle as it it founders and is rent by the eager teeth of barbarism within and without.  This is an aspect of civilization that is on its way out.

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