Hold on, Mr President

In all the gin joints in all the towns in all the world, filled with unemployed investment bankers and piano players, they dream of a new bull market to return with so much money being printed around the world. The pain of a reduced bank account has been accepted as a price for past excesses. So why not let's just move on? US President Barack Obama, striking a message of national unity, said recently that 'we need to look forward as opposed to looking backwards' when asked whether he would seek an investigation of the wrongdoings committed by the Bush administration. The ability to forgive is one of the most admirable traits of human nature. We should not knock it. But wait one second. What if, by ignoring the past, we are only sowing the seeds for a repeat performance in the future? Wouldn't we be setting a horrible precedent for our children that crimes can, and do, pay? Let's take a quick tour down memory lane before we totally forget, let alone forgive. At the heart of the bubble that is still bursting was the systematic wrecking of governance by the Republican Party. An angry US congressional committee last October asked former Federal Reserve chairman Alan Greenspan: 'Do you feel that your ideology pushed you to make decisions that you wish you had not made?' Mr Greenspan conceded: 'Yes ... Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself included, are in a state of shocked disbelief.' There is much in the view that the best government is the least government. Too often, officials are arrogant as well as incompetent, forgetting they are paid to serve the public. However, there is a difference between good and bad governance, between excessive and no regulation. Imagine a soccer match without a referee to enforce the rules. Or one where he simply walked away, leaving the players to faithfully observe those rules because a 'free market' solution is optimal. Many of George W. Bush's appointees went about wrecking that referee part of the government with the presumption that regulations, per se, were 'guilty' until proven otherwise. The list of all the wrecks is prohibitively long (but can be seen at Publicintegrity.org). Next to the Federal Reserve Board, the US Securities and Exchange Commission (SEC) is the other guardian of the financial system. The SEC under Mr Bush was notorious for looking the other way especially when matters concerned major financial backers of the Republican Party. Harvey Pitt, the former SEC chairman, was well known for his coziness with the accounting profession, which too often signed off on bogus financial statements of client firms such as Enron. It was the single largest contributor to Mr Bush's 2000 presidential campaign and helped him draft legislation 'regulating' the energy industry. Enron's chairman Kenneth Lay stayed at the White House 11 times as Mr Bush's guest. Mr Pitt left the SEC under a cloud. His successor, William Donaldson, lasted only two years because the Republican-dominated board joined up with powerful private-sector interests to sabotage his efforts to clean up corporate wrongdoings, often contradicting him at open hearings. The final SEC appointee, Christopher Cox - whom Mr Bush praised as 'a champion of the free-enterprise system' - resigned as Mr Bush left office. He was widely criticised for negligence, including ignoring warnings from SEC staff over suspicious dealings by trader Bernard Madoff. Investors also had their doubts about the accuracy of bond credit rating agencies that are essential to the proper functioning of the debt market, whose size, including credit-based derivatives, dwarfs the global stock markets. The SEC has jurisdiction over them, too. Moody's and Standard & Poor's, the two major credit rating agencies, 'own' 80 per cent of the market, enjoying an operating margin of more than 50 per cent. That is higher than even Microsoft (under 40 per cent) and Sun Hung Kai Properties in Hong Kong (under 46 per cent). Credit-rating agencies charge debt issuers for rating them. 'It's like cattle ranchers paying the Department of Agriculture to rate the quality and safety of their beef,' says one expert. Mr Obama would be making a major policy mistake if he were to forgive and forget. Greed will always ensure that rules will be broken, unless a fitting punishment is a certain outcome of a crime. Sin-ming Shaw, former visiting scholar at Harvard and Oxford, is a private investor