Carmen Reinhart: "Speculators Are Like Vultures," But Don't Blame Them for Greek Crisis

Updated from 3:57 EST

Update: At the White House Tuesday afternoon, Greek Prime Minister George Papandreou told reporters he got a “positive response” from President Obama for efforts to curb speculation in financial markets. 

Earlier: Before, during and (presumably) after today's meeting with President Obama, Greek Prime Minister George Papandreou railed against "traders and speculators" and called for stricter regulation of hedge funds.

"An elected government, making huge changes with the consent of its people, is being undermined by concentrated powers in unregulated markets, powers which go beyond those of any individual government," Papandreou said Monday at a speech at the Brookings Institute.

German Chancellor Angela Merkel and Luxembourg Prime Minister Jean-Claude Juncker echoed Papandreou's comments Tuesday morning at a joint event in Luxembourg, Bloomberg reports.

"There's nothing new about policymakers blaming speculators for financial ills, says Carmen Reinhart, co-author of This Time Is Different and a professor of economics at the University of Maryland. "It's a way in which policymakers point the finger at someone else. It's very common."

Indeed, Malaysian Prime Minister Mahathir Mohamed blamed speculators for causing the 1997-98 Asian crisis, while U.S. policymakers and Wall Street CEOs made similar complaints during the 2008-09 crisis; just last week, Citigroup's Vikram Pandit said as much.

Against the backdrop of Greek's debt woes, European leaders are pressuring U.S. policymakers for tighter regulation of derivatives, especially credit default swaps (CDS).

Credit default swaps provide insurance against the risk a specific entity can't pay its debts, be it a company or sovereign nation. But rather than being used as a hedge, critics say CDS have become tools for speculators to profit from others' misfortune and provide huge incentives for rumor-mongering, "bear raids" and financial panics.

But Reinhart says it's foolish to blame the speculators for a nation's ills.

"Speculators can be like vultures," she says. "They start flying in at bad times, but the creation of the bad times is a much longer buildup period - speculators only come in at the end."