Paul Volcker: a voice of sanity in a sea of inanity

Paul Volcker, chairman of the Federal Reserve from 1979-1987, had a good op-ed piece in The Wall Street Journal entitled "We Have the Tools to Manage the Crisis - Now we need the leadership to use them." He gives a credible review of the current problem and how to get out of it. He concludes:

There is, and must be, recognition of the essential role that free and competitive financial markets play in a vigorous, innovative economic system. There needs to be understanding, in that context, that financial ups and downs -- and financial crises -- will be inevitable, even with responsible economic policies and sensible regulation. But never again should so much economic damage be risked by a financial structure so fragile, so overextended, so opaque as that of recent years.

Bravo!

That last phrase is the key key, the opaqueness of the financial structure that kept so many people from really seeing the underlying risks. OTOH, there actually wasn't anything opaque about "the housing bubble", but there was incredible, monumental, unbelievable opaqueness about the fact and extent to which Wall Street and the big banks became dependent on bubble-priced assets and their ulta-opaque derivatives and with so much opaqueness about the risks of those assets to the financial system itself.

-- Jack Krupansky