Bair on the Big Picture

As the Dollars & Sense blog notes, Sheila Bair’s testimony before the FCIC was insightful. My favorite lines:

[The financial] crisis represents the culmination of a decades-long process by which our national policies have distorted economic activity away from savings and toward consumption, away from investment in our industrial base and public infrastructure and toward housing, away from the real sectors of our economy and toward the financial sector. . . .Corporate sector practices [have] had the effect of distorting decision-making away from long-term profitability and stability and toward short-term gains with insufficient regard for risk.

Even if GDP goes up, the problems she cites will haunt our economy for years to come. Stopping what Robert Kuttner has termed the “squandering of America” will require more than financial sector reform. But it’s a good place to start.

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