I watched the first video, and fully disagree with who is to blame. He sites Bernake and Paulson. The fact is, our present financial crisis stems from the failure to learn the lesson of the Long Term Capital Management failure in 2000. There, a derivatives risk management model developed by Myron Scholes allowed the horrible multiplication of the hedge fund bets that are just now coming undone (again).
FWIW, Alan Greenspan, when Fed chairman, warned against derivatives, but seemingly was powerless to do anything about them. He might have been Fed chief, but I believe he answered to higher authority, i.e., the banks who were his employer.
BTW, Myron Scholes was awarded the Nobel Prize in Economics (1997?) for his work in derivatives. That prize is a construct of the banking industry and has nothing to do with the Norwegian legislature, who award the orginal versons of the Nobel Prizes, none of which are for economics.
As an aside, I met Scholes a couple of times when he was at Stanford, and marvel at the thought now that I may have been in the presence of the man who gave birth to the ideas that eventually may have been the cause of our worst financial panic since the Great Depression. |
