Roots of credit crisis laid at Fed’s door

But one observer, Tom Schlesinger, the founder and executive director of the Financial Markets Center, a think tank that has followed the Federal Reserve closely for the past decade, believes the blame for the crisis falls squarely on the Fed and accuses the central bank of “regulatory foot-dragging” that has harmed the public. Schlesinger maintains the Fed’s prevailing regulatory philosophy has shifted from that of 20 or 25 years ago, which in essence was “here is the line between right and wrong, don’t cross it,” to a current underlying policy that “anything and everything that might be called financial innovation ought to be embraced.” “This is a very faulty premise that deserves debate and reflection and ultimately, in my opinion, a changed perspective,” Schlesinger said in an interview with MarketWatch. He points specifically to the opposition to government regulation that flourished at the US central bank under former Fed chief Alan Greenspan and has continued unabated under his successor Ben Bernanke. At the time Bernanke was preparing to succeed Greenspan, Schlesinger predicted his biggest challenge would be the aftermath of Greenspan’s laissez-faire approach to regulation. (full article)