Federal Reserve Building_SmallEven as the headlines report that the U.S. economy is improving, the drumbeat of recriminations stemming from last year’s financial crisis grows louder.

Rightly so.

The fact is, we have some basic sense of what happened but we don’t really know how we’d prevent a similar crisis in the future. And simply saying that we should not dwell on the past but should instead “look to the future” invites a repeat calamity.

Was the “systemic risk” on Wall Street fostered by outrageous salaries and beyond-belief bonuses? Were bankers intent on achieving growth intentionally oblivious to the risk of sub-prime mortgage lending?

And where were the regulators? Were Federal Reserve Bank chairman Alan Greenpsan, and his successor, Ben Bernanke, keeping a sufficiently watchful eye on the credit “bubble” as it emerged?

David Leonhardt gives this latter question a thoughtful look in an analysis in the New York Times. A few days ago, the Fed’s Mr. Bernanke gave a speech suggesting that the solution to a avoiding another financial crisis is “smarter and better” regulation.

Not so fast, says Leonhardt:

(Mr. Bernanke) and his colleagues fell victim to the same weakness that bedeviled the engineers of the Challenger space shuttle, the planners of the Vietnam and Iraq Wars, and the airline pilots who have made tragic cockpit errors. They didn’t adequately question their own assumptions. It’s an entirely human mistake.

Which is why it is likely to happen again.

What’s missing from the debate over financial re-regulation is a serious discussion of how to reduce the odds that the Fed — however much authority it has — will listen to the echo chamber when the next bubble comes along. A simple first step would be for Mr. Bernanke to discuss the Fed’s recent failures, in detail. If he doesn’t volunteer such an accounting, Congress could request one.

In the chaos that is the nation’s capital these days, there seems little substantive analysis of systemic fixes to the system risk that nearly plunged the nation into an economic depression less than a year ago.  Given the factious state of relations between Democrats and Republicans,  it seems unlikely that we’ll stumble upon a thoughtful process that would get us past the recriminations – and on the road toward a more sustainable economy.

Maybe Mr. Bernanke and his colleagues at the Fed are, indeed, the best potential solution.   They did a pretty good job of preventing a total economic collapse last year.  One can only hope that that they’ll be “smarter and better” the next time around.

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