Congress bet on the wrong horse

If Congress had set out to drive its miserable approval rating even lower, it couldn’t have come up with a better plan than its members’ posturing and bickering over blame for the near-seizing of the credit markets.

Everyone in that august body seems to be disavowing any previous knowledge of the big banks’ runaway leverage — borrowing up to 30 times as much as they controlled in real assets, to wheel and deal in exotic financial instruments. They’re shocked. Shocked!

This makes those members of Congress either asleep for the past half-dozen years, stooges for lobbyists or the dumbest people in the room. Anyone who read newspapers or magazines or watched television knew that banks, mortgage brokers and brokerage firms were doing risky and downright weird things.
Any member of Congress who didn’t know about the hazards of leveraging should fire his or her entire staff for incompetence.
About four years ago, the potential dangers were highlighted in a cover story in Time Magazine, warning that derivatives were a largely unfathomable cloud hovering over the financial system, in language that evoked the image of the Death Star from “Star Wars.”

After a while, the wheel-and-deal games became as American as cherry pie. Pension funds and not-for-profits and university endowments, from Harvard to the University of Virginia, got into the hedge-fund game. (UVa seens to have picked the right blackjack tables, at least as far as we know at this point.)
Several years ago, the chief financial officer of UVa was chastised by a member of the Board of Visitors for earning a mere 8 percent return on the university’s endowment funds one year. It seemed that other schools had earned up to 13 percent that year. Message? Take bigger gambles.
I f this sad episode in our history is ever the topic of a movie, its theme music should be the tune from the musical “Guys and Dolls,” sung by a racetrack hustler, that begins “I got the horse right here, his name is Paul Revere ...”