Former Fed Chairman Alan Greenspan was called into Congress today to explain what went wrong with the flagging economic system. Greenspan admitted that his deregulatory philosophy "did break down". He added that he had been "shocked" by the crisis and that "I still do not fully understand why it happened."1 The Former Fed Chief admitted that "additional regulatory changes" were required "to return to stability, particularly in the areas of fraud, settlement, and securitization."
A recent article Newsweek article by Michael Hirsh explains that Greenspan's inaction, his failing to write rules for subprime lending, had a major effect on this economic environment. Hirsh's article adds that the so-called regulators, the Office of Comptroller of Currency and the Office of Thrift Supervision were sponsored by the industry rather than the government.2 OTS customers have included IndyMac, Washington Mutual, Countrywide, and Merrill Lynch.
The US Labor Department reports that the U.S. economy has now lost jobs for nine consecutive months, with more losses expected in October. The Department reports that 760,000 people in the US have lost work this year.
In other news, The NY Times reports that as a consequence of this economic downturn, more people are reducing their medications.3 The US currently spends $2.26 trillion per year on medical care, the highest costs in the world, although health outcomes are worse than several other nations.