In his column titled An Irish Mirror, Paul Krugman notes “the most striking similarity between Ireland and America was “regulatory imprudence”: the people charged with keeping banks safe didn’t do their jobs.”  (emphasis mine)

The phrase “regulatory imprudence” is far to imprecise — and wimpy — to describe what took place. Imprudent, as defined by Merriam Webster, is “lacking discretion, wisdom, or good judgment.” (Imprudence is the “state of being imprudent”).

If the Fed was only guilty of bad judgment or lack of wisdom, we could live with that. After all, people are fallible and judgment can go awry.

But that was not what occurred; rather, under Alan Greenspan, the Fed was guilty of Nonfeasance.

According to West’s Encyclopedia of Law, the definition of nonfeasance is far harsher:   It is the intentional failure to perform a required duty or obligation.

When Greenspan made the decision to not regulate or oversee non-bank lenders, his choice was nonfeasance. He chose not to do something that he was bound to do as part of his official duty. (In common law, this was punishable by fines or imprisonment or both).

Category: Bailout Nation, Federal Reserve

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

17 Responses to “Not Regulatory Imprudence, Nonfeasance~!”

  1. Blurtman says:

    Let’s not forget the worst (so far) SEC chairman ever, Christopher Cox.

    In olden days, evil men like Greenspan would have been hung outside of the city gates for all to see.

    Now he gets to ride off into the sunset of the lecture circuit, with his platinim be-wigged wife.

    That is clearly progress.

  2. Robespierre says:

    “He elected not to do something that he was bound to do as part of his official duty. (In common law, this was punishable by fines or imprisonment or both).”

    Have you seen any changes on this policy? Well there will be none until the secon part of your paragraph happens:”punishable by fines or imprisonment or both”

  3. Mannwich says:

    I have a better word or phrase: “criminal negligence”.

  4. Mr.E. says:

    In principle I agree, although it may be misfeasance. I wanted to be sure I had my terms correct, so a quick check with Wikipedia (hardly an authoritative source) provides the following regarding duties of public servants:

    “At present the terms misfeasance and nonfeasance are most often used with reference to the conduct of municipal authorities with reference to the discharge of their statutory obligations; and it is an established rule that an action lies in favour of persons injured by misfeasance, i.e. by negligence in discharge of the duty; but that in the case of nonfeasance the remedy is not by action but by indictment or mandamus or by the particular procedure prescribed by the statutes.

    This rule is fully established in the case of failure to repair public highways; but in other cases the courts are astute to find evidence of carelessness in the discharge of public duties and on that basis to award damages to individuals who have suffered thereby.”

    And what about Mr. Greenspan’s successors ? Yes, they may have been handed a completely misguided effort to lead, but they chose to continue the course rather than make any attempt to correct the errors. Are they not equally culpable?

  5. Pat G. says:

    I agree with your, “intentional failure to perform a required duty or obligation.” Which then makes it malfeasance; wrong or illegal conduct, especially in politics or civil service. Which is an unlawful act.
    Also “punishable by fines or imprisonment” but good luck with that…

  6. Moss says:

    No question ‘malfeasance’ is the better definition. But is was all predicated on ideology.

  7. gordo365 says:

    Why should it matter if ideology drives the decision to not perform duties?

    If the health inspector fails to write up a resturant that doesn’t comply with health code – and your child gets food poisoning – does it matter if the decision to “let it slide” is driven by belief in letting free market do it’s thing in the resturant business rather than the fact that the resturant owner is the inspector’s brother in law?

    If you are in a law enforcement role – you should enforce the laws or quit!

    Gordo

  8. troubled times says:

    And Cox blamed the shorts…The SEC blamed the shorts , one of the few that were right and tried to warn……..But hell, it was time to goose the markets and show Bin Laden he couldn’t damage our great county…I hope i live long enough to read a serious review of this period in our history

  9. Marc P says:

    BR, this blog entry assumes that the Fed didn’t know what was coming. Consider the possibility that those controlling the Fed did.

    The Fed is a private company controlled by the banks. (I’ll use that popular term rather than the more apt “speculative trading firms”). These banks made huge profits during the bubble. Now they have made huge profits through gifts from the U.S. taxpayers. All through the crisis, from Sept. 2008 through 2009, the leadership of these banks and their co-op called the Fed claimed that they didn’t know what was coming, that nobody could have seen it, etc. However, we know now that they did in fact know it was coming and made plans for it.

    Regulations changed in advance of the crash. The Fed changed regulations to allow it to lend money to banks based upon mark-to-fantasy valuations rather than market valuations. Also, the Fed changed regulations to enable it to take the unprecedented action of buying assets from the banks, and these regulations permitted the purchase at above market prices. The banks have off-loaded the toxic assets to the Fed, the Fed has printed money to buy them, and the taxpayer ends up paying the overvalation. These regulatory moves happened in late 2007 and early 2008. Neil Kashkari wrote a plan for dealing with the meltdown in spring 2008. This isn’t rumor; I have a copy of the memo.

    This isn’t a sin of omission. It’s not a sin of commission. It’s not a failure of the Fed at all. The Fed did what it is designed to do and legally permitted to do: protect the banks and expand their balance sheets. The malfeasance and nonfeasance is by us, and the question is why the American public is buying the old PR spin that “the Fed is an independent gov’t agency that has the people’s best interests at heart.”

  10. Intuition says:

    I think nonfeasance is more technically specific, which means that it will make people’s eyes gloss over :)

    Unfortunately, it’s absurd to ever expect the Federal Reserve to capably regulate banks. Based on their actions to date, the Fed’s only recognizable goals seemingly lie in expanding their power and increasing the debt loads at every level of society. We know they will never be directly punished for their (in)actions and it’s clear that debt saturation is occurring in every way, so the only reasonable course is to disband the Fed and return to a sovereign currency not based on debt. Freedom’s Vision (laid out in full at swarmusa.com) would solve these problems.

  11. Dogfish says:

    Marc P:

    “BR, this blog entry assumes that the Fed didn’t know what was coming. Consider the possibility that those controlling the Fed did.”

    As a corollary… “Nobody could of foreseen that terrorists might use airplanes as missiles”

    Basically… undertake illegal and/or immoral actions in pursuit of planned objectives (Shearing the middle class sheep for rich friends, be it by war profiteering or financial fraud), then feign ignorance of evidence revealing said actions until aforementioned sheep are distracted by some new shiny object.

  12. ewmayer says:

    Greenspan may “merely” have been guilty on nonfeasance with respect to his refusal to use the congressional authority (and implied mandate that accompanied it) granted the Fed to regulate lending practices, but he went further and crossed well over into actual malfeasance when it came to his reckless interest-rate policies and active promotion of “alternative mortgage products”. He might get away with having missed the first of the resulting asset-price bubbles on mere-gross-incompetence grounds, but not the second, even-bigger one: Not only were top people at the Fed like the late Ed Gramlich warning him about the collapse in lending standards and the inflating RE bubble, but GREENSPAN’S OWN PHD THESIS WAS ON REAL ESTATE BOOMS AND BUSTS, for frick’s sake:

    http://bigpicture.typepad.com/comments/2008/04/greenspans-long.html

  13. GlassComplex says:

    Why does Krugman write his readable pieces in the NY Times, and spits out and old anti-republican lines in the Irish Times! Not that I’m a big fan of republican fan.

    He’s writing there weekly now for those interested…
    http://www.irishtimes.com/newspaper/opinion/2010/0308/1224265794065.html

    ~~~

    BR: That looks like his Friday NYT column from last week . . .

  14. farmera1 says:

    I have long tried to understand Greenspan. As a personal friend of Ayn Rand and a true devotee that spent a great deal of time with her, how did he end up running the FED. The same FED that is the biggest bureaucracy this side of the old Kremlin. So a true believer in unfettered capitalism ran the FED, and ended up coming very close to destroying (along with a whole other cast of characters) this country.

    In his book, AGE OF TURBULENCE, he gives a shot at explaining his actions.

    “By the time I joined Richard Nixon’s campaign for presidency in 1968, I had long since decided to engage in efforts to advance free-market capitalism as an insider, rather than as a critical pamphleteer. ”

    “It did not go without noticed that she (Ayn Rand) stood beside me as I took the oath of office in the presence of President Ford in the Oval Office. Ayn Rand and I remained close until she died in 1982 and I’m grateful for the influence she had on my life.”

    Greenspan believed (and still does at least upto 2007 when he wrote his book) in Ayn Rand. With her unremitting hostility towards the State and firm belief in laissez-faire capitalism, hardly could be guiding lights to anyone leading the FED and regulating banks.

    Now you don’t suppose Greenspan all along intended to destroy the FED. He came very close and the final out come hasn’t been written.

  15. wngoju says:

    nonfeasance. good.

  16. bman says:

    You know I always was intrigued by Alan Greenspan, a shared stooge by multiple adminsitrations, yet somehow faintly revered, even if partially embalmed, to allow the mysterious workings of the markets to continue with his smiling benificence beaming down upon us all…

  17. mknowles says:

    These days, if I need a Law and Order fix, I watch it on teevee, ’cause it’s not happenin’ in real life, not for bankster elites and their nonfeasal (new word I just made up) regulating partners in crime.