It Seems Like Washington Wants Another Financial Disaster

By Paul Krugman

America emerged from the Great Depression with a tightly regulated banking system. The regulations worked: the nation was spared major financial crises for almost four decades after World War II. But as the memory of the Depression faded, bankers began to chafe at the restrictions they faced. And politicians, increasingly under the influence of free-market ideology, showed a growing willingness to give bankers what they wanted.

The first big wave of deregulation took place under Ronald Reagan — and quickly led to disaster, in the form of the savings-and-loan crisis of the 1980s. Taxpayers ended up paying more than 2 percent of G.D.P., the equivalent of around $300 billion today, to clean up the mess.

But the proponents of deregulation were undaunted, and in the decade leading up to the current crisis politicians in both parties bought into the notion that New Deal-era restrictions on bankers were nothing but pointless red tape.


And the bankers — liberated both by legislation that removed traditional restrictions and by the hands-off attitude of regulators who didn’t believe in regulation — responded by dramatically loosening lending standards. The result was a credit boom and a monstrous real estate bubble, followed by the worst economic slump since the Great Depression. Ironically, the effort to contain the crisis required government intervention on a much larger scale than would have been needed to prevent the crisis in the first place: government rescues of troubled institutions, large-scale lending by the Federal Reserve to the private sector, and so on.


Talk to conservatives about the financial crisis and you enter an alternative, bizarro universe in which government bureaucrats, not greedy bankers, caused the meltdown. It’s a universe in which government-sponsored lending agencies triggered the crisis, even though private lenders actually made the vast majority of subprime loans. It’s a universe in which regulators coerced bankers into making loans to unqualified borrowers, even though only one of the top 25 subprime lenders was subject to the regulations in question.

Oh, and conservatives simply ignore the catastrophe in commercial real estate: in their universe the only bad loans were those made to poor people and members of minority groups, because bad loans to developers of shopping malls and office towers don’t fit the narrative.


The America Where They Do Prosecute Torture

By Sam Ferguson

Last week, 15 men entered a courthouse facing, amongst other crimes, 181 counts of torture. Their story, tragically, is familiar: in a fight against terrorism, the men allegedly kidnapped and held detainees in unknown black sites. They subjected the prisoners to brutal forms of interrogation, such as waterboarding, sensory deprivation and simulated executions. They denied the detainees all legal recourse, and they defended their secret practices as essential to combating an elusive enemy who refused to play by the rules.

But the courtroom is not in the United States, and the defendants are not members of the Bush administration. The defendants - retired officials from Argentina's last dictatorship - are on trial in Buenos Aires, Argentina.


It has been more than three months since Attorney General Eric Holder announced his probe into torture under the Bush administration, an investigation which seems to quickly be going nowhere. ... He may be inspired, however, by how some Latin countries have proceeded in the face of similar concerns.

One common argument against prosecution is that torture is effective, and we should not prosecute those who helped protect America.

This, however, was the same logic used by Latin America's military governments: they had to wage a "dirty war" on their enemy's terms. No doubt, the danger there was real, as it is in the United States. Leftist groups had killed hundreds before the wave of coups claimed the lives of thousands. But in retrospect, the dirty wars did more damage to the legal order than had the enemy it was fighting. Our southern neighbors have rejected the argument that one may break the law to save the law. They have restored the law by prosecuting those who broke it.

Another argument against prosecution is the supposed impossibility of figuring out who is responsible. Are those at the top, such as former Defense Secretary Donald Rumsfeld or White House counsel John Yoo, responsible? Or should blame fall only on those who carried out the offensive practices?

In Latin America, the answer is both. Argentina's Supreme Court, in the 2005 Simon decision, held that torture is manifestly illegal and that no excuse justifies either giving or following orders to torture. Commander and commanded are equally responsible.


Finally, some excuse the Bush administration by saying what they did was not torture. Waterboarding is simply an "enhanced interrogation technique," as former Vice President Dick Cheney described it this August while defending the practice.

But this is a lexical sleight of hand. The debate is a nonstarter in Latin America. Though waterboarding is known by another name - the "submarino" - it is decidedly considered torture. Courts have repeatedly convicted defendants for subjecting prisoners to this "method," citing domestic and international prohibitions on the use of the practice. Ironically, our own government, lead by the late Sen. Edward Kennedy, sanctioned Argentina in the late 1970s for using this very practice (amongst other concerns).


For centuries, the democracies of Latin America have looked north for inspiration: how to write their constitutions, how to design their government buildings, how to structure their economies. Perhaps it is time for us to look south.