What is common between John McCain and Joseph Stiglitz?

by Manshu on September 19, 2008

in Opinion

John McCain said today that if he comes to power he will fire the SEC chief Rox because the regulator has failed to perform his duty. This is a bid from the McCain camp to distance itself further away from the Bush administration and point out how many things that administration got wrong.

What is interesting is that not long ago, Nobel prize winner Joseph Stiglitz has also noted that regulators didn’t do their job well enough. He said that “key regulators like Alan Greenspan didn’t really believe in regulation; when the excesses of the financial system were noted, they called for self-regulation — an oxymoron”.

Stiglitz goes one step ahead and says that the goals of the CEO and the shareholders are not aligned and that is why they ended up doing a lot of things that ended up in hurting the long term finances of the company. When you consider that Lehman never even reported a quarterly loss after going public till early this year and then goes bankrupt suddenly, its just something that can’t be comprehended easily.

While both McCain and Stiglitz are recognizing a failure of regulation there are differences in the way they wish to approach the problem. McCain has always been a supporter of deregulation and favors not going after companies and increasing regulation. In fact just last week he said that the fundamentals of the US economy are still strong. A comment that drew much flak from a lot of quarters.

On the other hand Stiglitz proposes a creation of a “Financial Stability Commission” to take an overview of the entire financial system, more regulation to improve the safety of the financial system and more consumer protection laws.

Stiglitz has some very interesting ideas on how to avoid the next crisis and you can read them here:


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