If governments hadn't been messing with the economy in the first place then there wouldn't have even been a crisis. Don't let the negative consequences of government intervention lead you to believe that yet more intervention is needed.
It's not in the best interests of bank shareholders to let their banks get in financial trouble. It is, however, in the best interest of politicians to pass seemingly popular laws, even if those laws are terribly stupid: Freddie Mac, Fannie Mae, affirmative-action lending, setting interest rates way too low (or even being involved with setting rates at all), pressuring ratings agencies to maintain positive ratings (to make sure constituent home prices keep going up up up!...oops), a history of bailing out banks in some way or another (see: Mexican debt crisis in the nineties) thereby creating moral hazards, etc etc etc. The politicians look great when they do this stuff because it "helps the people blah blah blah". However, those very same people are really hurting now, and many of them may not ever be able to buy a house again since their credit rating will be damaged for years. At best their life savings and standard of living have been significantly reduced (as have everyone else's). If government hadn't interfered in the market/economy with all those policies/legislation in the above list none of this would have happened. Nice job pols. Enjoy the lucrative lobbying gig as a fallback should the voters ever catch on.
Government interference caused the crisis, not the banks. The banks are responsible, however, for failing to catch on, and yes, this was partly due to greed. That said, it is
their job to catch on to this type of stuff so that they can serve their clients in the best manner possible. However, given the complexity of the situation and the fact that 99% of them got it wrong, this isn't something they should be terribly ashamed of (unless of course they committed fraud or ethical violations, which the court system is designed to handle...btw I'm all for revamping enforcement methods, especially since the SEC has a problem with employees surfing pornsites on the job
). This isn't to say that the bankers shouldn't suffer consequences, such as going bankrupt or losing their jobs (certainly not getting fat bonuses), but I'm not about to decry them as evil, except for the few bad apples, which will appear in any group.
And the fact that they all got it wrong just proves my point. If the people who make careers working in the banking system, seeing it firsthand everyday, can't understand what's happening then why should we expect some government regulator to be able to? Ben Bernanke is often cited as one of our best economists (his predecessor Alan Greenspan was even revered as a hero), yet just a couple months before home prices began plummeting he was on record saying there was no housing bubble. Right before Bear Stearns collapsed he claimed that the housing bubble was contained and wouldn't affect the financial system. And just a couple weeks before Lehman Brothers went bust he claimed that the crisis was over. Hell, even when Lehman was collapsing the records show he believed that Merrill Lynch would be a perfect candidate to buy it. Merrill itself collapsed within a week. He just didn't understand what was happening. This isn't to say that he's not smart or even that he screwed up, it just means it's an impossible task. We're literally asking him to predict the future and to change it if it looks bad. Only a few people knew what was going on. Some of them were just lucky, and there's nothing saying that the others will predict/understand the next crisis. It can't be done.
We can play whack-a-mole with the economy every time something goes wrong. But frequently we're going to find that new regulations will just create some adverse side effect. A regulation is simply a control mechanism. When a new regulation is created it's designed to control the behavior of individuals or institutions, with the intent being that innocent bystanders (or even those being controlled) will be protected. So when we pass regulations on such a huge segment of the economy, one that is already extremely complex, we're essentially trying to control millions of people/institutions and to dictate how they interact with one another. That's obviously a monumental task. No amount of regulators/watchdogs/enforcement agencies will be able to do so. At some point, we have to just let people be responsible for protecting themselves, and I think we passed that point long ago. All we can really do is to provide an effective legal system to punish those who violate the rights of others. No amount of regulation, however, will prevent people's rights from being violated.
We can help, however, by not complicating the system. This means politicians shouldn't be throwing monkey wrenches into the economy that mislead all the parties involved, whether they're bankers, investors, borrowers, homeowners, whoever. Sometimes shit happens. People get burned and it sucks. But those individuals learn from the incident. Look at the tech bubble a decade ago. No one understood the business models of internet companies. Not investors, politicians, established businessmen, or even the management at many of these companies. They were so damn new and the experts didn't even know anything about them (sounds kind of like a mortgage-backed security...hmmm). Everyone literally thought that a successful web company was one that merely had a lot of visitors, or even just the potential to. That's important for a website, but profitability barely factored into the equation. How stupid is that in retrospect? People were investing a fortune into companies that hadn't made a dime and had little chance to do so. Sure enough, it all went bust. But we didn't address that situation by passing all sorts of regulations on internet companies, even though a lot of people were hurt when the bubble burst. The internet is arguably the least regulated area of the economy. But there's no new internet bubble popping up. The sector is doing just fine. Even if there aren't any new regulations passed on the finance industry there won't be another housing bubble anytime soon (or at least not with the same causes). People aren't that
stupid. They typically learn from their mistakes.
And until Ben Bernanke can start predicting the future (and even if he could, would we listen?), there will certainly be another economic crisis, regardless of what type of regulations are passed. There's a decent chance that the regulations themselves might even cause that next crisis. With these proposed financial reform regulations we can also count on increased borrowing costs for businesses and individuals along with higher fees. It certainly won't help unemployment, especially if our banks have to compete with other banks in foreign countries with looser regulations. I just don't see the point.
What's this have to do with Greece? Are they victims of the financial crisis. Yes. But did they position themselves to weather an economic downturn? No. They spent and spent and spent and left themselves very little cushion. Their spending would have caught up with them anyway even without the crisis. My favorite line is that "speculators" are to blame for their problems. Did they really not know that speculators play a role in the sovereign debt markets when they decided to issue debt? What about the speculators that are currently buying Greek bonds (and thereby pushing the interest rates lower), taking on the risk that Greece will default but hoping it doesn't? Funny, I don't think they'd have a problem with these speculators. They have a responsibility to look after their own finances. If they default then that's their fault. They knew the risks involved with issuing debt. It sucks, but they'll survive and will be able to move on and hopefully will spend less on credit in the future. It's not like they're being treated unfairly. The same thing can easily happen to any other country if it mismanages it's finances.