‘After the Music Stopped,’ by Alan S. Blinder - NYTimes.com

‘After the Music Stopped,’ by Alan S. Blinder - NYTimes.com: "

Starting in the late 1990s and continuing through 2007, he writes, Americans had “built a fragile house of financial cards” that was just waiting to be toppled: “The intricate but precarious construction was based on asset-price bubbles, exaggerated by irresponsible leverage, encouraged by crazy compensation schemes and excessive complexity, and aided and abetted by embarrassingly bad underwriting standards, dismal performances by the statistical rating agencies and lax financial regulation.”

“He calls the former Federal Reserve chairman, Alan Greenspan, and the Clinton-era Treasury secretaries, Robert E. Rubin and Lawrence H. Summers, to account for their antiregulatory stances, which laid the groundwork for the market excesses and snowballing fiscal disasters that would explode in 2008.”

“He identifies Fannie Mae and Freddie Mac — with their low-income and subprime mortgage portfolios — as being only “supporting actors” in the debacle. And he calls the collapse of Lehman Brothers on Sept. 15, 2008, the “watershed event of the entire financial crisis” and the government’s decision “to allow it to fail” as “the watershed decision.” “It is a measure of the Obama administration’s ineptitude in communication,” Mr. Blinder notes, “that the public came to see Geithner, Summers, & Company as tools of Wall Street while at the same time the bankers who were saved from oblivion came to hate the administration for vilifying and scapegoating them. Acquiring one of those two images was excusable, maybe even unavoidable. Acquiring both at the same time amounted to gross political negligence.”

“What of “the specter of trillion-dollar-plus budget deficits” and the partisan dysfunction in today’s Congress? Mr. Blinder says: “America’s budget mess is starting to look Kafkaesque because the outline of a solution is so clear: We need modest fiscal stimulus today coupled with massive deficit reduction for the future. Some of that will take the form of higher taxes — sorry, Republicans. Most of it will be lower spending — sorry, Democrats.”