We might have listened after we bailed out Long Term Capital Management.
Krugman argues that it’s all been Maddow. “The pay system on Wall Street lavishly rewards the appearance of profit, even if that appearance later turns out to have been an illusion.”
Why did this happen? Bankers sin. It didn’t happen in India. Why? Joe Nocera writes why. One reason: The Anti-Greenspan. He regulated, and kept bankers to their senses.
“His name was Dr. V. Y. Reddy, and he was the governor of the Reserve Bank of India…. And in the irascible Mr. Reddy, who took office in 2003 and stepped down this past September, it had exactly the right man in the right job at the right time.
“He basically believed that if bankers were given the opportunity to sin, they would sin,” said one banker.
India’s bankers were naturally furious, just as American bankers would have been if Mr. Greenspan had be
en more active. Reddy was constraining their growth! Mr. Parekh said that while he thought Indian real estate was in bubble territory, he was still unhappy with the rules imposed by Mr. Reddy. “We thought these were harsh measures. The bankers thought they were missing out. Banks in the United States could post instant, short-term, profits – magically.
As Luis Miranda, who runs a private equity firm devoted to developing India’s infrastructure, put it: “We kept wondering if they had figured out something that we were too dense to figure out. It looked like they were smart and we were stupid.” Instead, India was the smart one, and we were the stupid ones.