Whose Fault Is It? Paul Krugman's Bizarro Universe

by: Ira Stoll

It's not just President Obama who seems to want to think these days that the financial crisis is all the fault of Wall Street, and that government had nothing to do with it. Here's Nobel laureate Paul Krugman's column in Monday morning's New York Times: "Talk to conservatives about the financial crisis and you enter an alternative, bizarro universe in which government bureaucrats, not greedy bankers, caused the meltdown."

But even Mr. Krugman has blamed the politicians for unfettering the bankers. And in the past, as recently as three months ago, President Obama himself said that the blame belongs to Washington as well as Wall Street and Main Street: "What took place one year ago was not merely a failure of regulation or legislation; it was not merely a failure of oversight or foresight. It was a failure of responsibility that allowed Washington to become a place where problems – including structural problems in our financial system – were ignored rather than solved. It was a failure of responsibility that led homebuyers and derivative traders alike to take reckless risks they couldn't afford. It was a collective failure of responsibility in Washington, on Wall Street, and across America that led to the near-collapse of our financial system one year ago."

In other words, it's not some conservative bizarro universe that says Washington bears some of the blame for the crisis; it's the conventional wisdom as reflected by President Obama. If anyone's operating in a bizarro universe here, it's Mr. Krugman. Like nearly everyone who throws the word "greedy" around pejoratively these days, Mr. Krugman doesn't define it or say how it differs from the profit motive or rational self-interest that is part of capitalism.