Let's Play the Davos Blame Game

It's not easy solving the world's problems, but that's what you do in Davos. After you create them.   At a brainstorming session this afternoon—go ahead, make your joke—that resolved to establish the cause of the current crisis, we all agreed that the biggest portion of blame could be assigned to the regulators. And the politicians; and the bankers; and the risk managers; and the rocket scientists who created CDOs; and everyone who took out a mortgage. Oh, and the efficient markets theory. “Not a single person has come to its defense,” noted Yale economist Robert Shiller. I'm glad we cleared up the blame issue.

There was a slightly crisper discussion of who was to blame and who was going to fix it earlier in the day when Howard Lutnick, ceo of Canter Fitzgerald, acting as capitalist agent provocateur, made the case that the governments should resist the urge to regulate. How much more Sarbanes Oxley do we need, he asked, citing the much loathed accounting rules passed in the wake of Enron.  He also warned about too much government in participants in the credit markets. “Corporations are being pushed out by governments,” he said. “Governments can't leverage and tell banks to deleverage.”

Wanna bet?  The government types in the room, economists and ministers past and present, jumped Lutnick immediately. Corporations and banks? “Why should they trust them,” said economist Laura Tyson, who once chaired the U.S. Council of Economic Advisors. Government wasn't crowding out banks, she said, government was crowding in to get spending going. It was noted that countries where the government rode herd over its banks—China and India, for instance—haven't suffered the same kinds of meltdowns. The chairman of Lloyds of London, Lord Peter Levene, (the company has avoided trouble) called for banks to be boring again. “Boring is good,” quoth Lord Levene. The message to cowboy capitalists was clear, and it resounds in Davos: your free-ranging days are over