A Modest Proposal

The spectacle of parading the eight CEOs of the largest TARP recipients before Congress sure gave our representatives a chance to show how "tough" and "mad" they are. But it doesn't really shed much light on why we got into this mess.

But there is a public hearing that would be quite instructive.

Convene a panel, comprised of leading economists, to question the leaders of the Federal Reserve and Congress for their role in promoting policies that caused our crisis.

A robust questioning of Alan Greenspan and Ben Bernake by their peer economists would highlight the devastating effect the Fed's low interest rate policy had in creating the debt-fueled housing bubble, and would be far more interesting than similar questioning in the past by a Congressional committee.

Then the panel could question Congressmen and Senators, such as Barney Frank and Chris Dodd, about their push for Fannie Mae and Freddie Mac to expand subprime lending, their opposition to Republican efforts to rein them in (see this video), and their comments about the lack of risks posed by them. Chris Dodd could also explain the sweetheart mortgage deals he received from Countrywide, an important partner to Fannie Mae.

The panel could also call as witnesses members of The Wall Street Journal editorial board, who could discuss their warnings years ago about the risks posed by the Fed's low interest rate policy and by Fannie and Freddie - making clear that the crisis could have been avoided.

If you think this is somehow too tough on the politicians and the Fed, consider this. CEOs of financial services firms have lost jobs, wealth, income, and reputation from the crisis - as well as they should. These politicians have been rewarded with greater political power, while the Fed has been rewarded with unprecedented economic power.

So by all means let's convene panels to question the key actors in our economic crisis - let's just make sure it covers the right participants.