Today's Outrage: Congressional Hypocrisy

It must be nice to sit in the accuser's seat so that no one can question you.

That's the trick our Congressional leaders are using to avoid their own responsibility for the financial quagmire we're in.

Yesterday, lawmakers took turns grilling former Fed Chairman Alan Greenspan about the lack of regulation that got the U.S. into this mess. Earlier in the week, they put the CEOs of the big three ratings agencies -- Standard & Poor's, a division of McGraw Hill (MCG), Moody's (MCO) and Fitch -- in the hot seat as part of the continuing parade of scapegoats being called to Capitol Hill.

Don't get me wrong, the outrage is certainly justified. But what about the very real role Congress played in all this? Who makes the laws in this country? Who sat by and let all this happen? Who failed to ask the tough questions back when banks were doling out loans that borrowers could never repay?

At least Greenspan took responsibility for his failures (You can read about his testimony here: Greenspan Admits Flaw in Regulation).

Looking back to yesterday's attacks on the former Fed boss, the most outrageous moment came when Greenspan said that financial institutions should be required to keep a "meaningful part" of the assets that back securitized mortgages. Ya think?

This notion of trading a derivative of a derivative of a derivative always sounded a little unsound to me. Banks such as Citigroup (C) and Merrill Lynch (MER) have written off hundreds of billions of dollars in bad mortgage-related securities as worthless, but home prices have not gone to zero. Bet they'd like to have a claim on those assets now.