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Alan Greenspan's collapsing reputation
Monday, December 15, 2008
In The Top 10 Everything of 2008 in the current issue of Time Magazine, there are dozens of categories for which editors have compiled a top ten list based on the events of the last year.
From the serious (Top Medical Breakthrough: First Neurons Created from ALS Patients) to the sublime (Top Sports Moment: Tiger's One-Legged Roar), the list encapsulates much of what will be remembered in 2008.
From the silly (Top Strange Baby Name: Bronx Mowgli by Ashlee Simpson) to the insignificant (Top Jerry Stiller Word: Falafel), it will be looked back upon as a snapshot of our culture during this time.
A new category appears this year which, hopefully, will not become a regular item for this December issue in the years ahead - Financial Collapses.
All of the expected entries are there - Lehman Brothers, AIG, Fannie and Freddie, hedge funds, and more.
Interestingly, of the top ten collapses listed, only one was a reference to an individual.
9 comments:
The Fed Funds Target Rate does not directly control mortgage rates. His control of easy lending was limited. The housing bust is not 100% the fault of Mr. Greenspan.
this pig will be doing the Enron perp walk with Rubin and Frank and Dodd and Schumer and Tangelo and the rest of the crooks. Paulson doesn't get a pass either.
I hated that Bush wanted to throw a bone to the left (which they never acknowledge and Republicans should stop it) and kept Slick's money guru. Andrea Mitchell out hawking stories has no idea that she sleeps with the pig that helped start this mess (missing the biggest story on earth, Depression II).
Greenspan and Rubin and Slick were all in the room in 99 when they gutted the Glass-Steagall Act that gave them the license to steal us into another Depression, hell that is why the law was on the books since the Depression in the first place.
Nope Greenspan is scum and history will make sure everyone knows it. I mean he went to work at one of the largest Hedge Funds that bet against America the whole time Greenie was taking us down, NO COINCIDENCE!!!!!!!!!!!!!!!!!
catherine
Nobody is saying he is 100% responsible. However, he bears major responsibility. In addition to his FFR blunder, Greenspan also praised the rise of the subprime mortgage industry and the tools which it uses to assess credit-worthiness in an April 2005 speech:
"Innovation has brought about a multitude of new products, such as subprime loans and niche credit programs for immigrants. Such developments are representative of the market responses that have driven the financial services industry throughout the history of our country … With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers. … Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending; indeed, today subprime mortgages account for roughly 10 percent of the number of all mortgages outstanding, up from just 1 or 2 percent in the early 1990s"
He's not 100% responsible, but he has been at the center of things, dismantling the regulatory apparatus, and encouraging all manner of dubious "innovation," since the 1970s.
He is more responsible than any other person or organization.
Greenspan doesnt deserve 100% nor even more than 50% of blame but clearly does deserve a plurality of the blame. He failed to do a key part of his job which was to enforce the simple common sense laws already on the books like for example you can'tr walk into a bank and lie in writing about your income (and bankers can't encourage you to do so). This ain't left wing micromanaging regulation it's just common sense especially in light of the fact that taxpayers ensure bank deposits. He had a few other devastating quotes liken aboit 2005 said "the balance sheets of american consumers are strong". The guy knows nothing of consumer finance. Had he worked in the credit department of a used car lot or car finance company he probably woould have learned real quick what happens when you lend to people who are some combination of stupid, unemployable, irresponsible etc. I doubt he ever persoanlly met a person like this so just oblivious to what the reality is like in consumer credit.
Catherine 6:20, tell me what specific provision of Glass-Steagall would have prevented the collapse of underwriting standards.
Glass-Steagall didn't address mortgage securitization, derivatives, credit default swaps, or the ratings agencies. Virtually none of those things even existed in the 1930s. The problem was not the "gutting" of a Depression-era relic, but the failure to regulate recent financial innovations.
You can simplify this debacle into a simple "deregulation" morality tale, but you'd be wrong. The United States has a massively regulated financial system; the regulatory burden is heavier today than it has ever been. Unfortunately, the underpaid, second-rate civil servants who write the regulations are no match for the overpaid, top-of-their class types who make millions crafting financial instruments that avoid the regulations.
Thomas: how about the provision that would have kept AIG - the worlds largest insurer - from choosing (yes they got to choose) to be regulated by the OTS simply by purchasing a small savings and loan.
I am not going to state that Greenspan deserves the blame-
I will Let Mr.Stephen S. Roach
do that for me.
http://tinyurl.com/6drqym
Quotes worth repeating-
"It didn't have to be this way.
Just saying no to asset bubbles was always an option.
A variety of anti-bubble tools—
the bully pulpit of jawboning,
more disciplined regulatory oversight,
and, ultimately, a tighter monetary policy—could have prevented disaster."
and
"Mr. Greenspan has been blinded by a dangerous combination of politics and ideology in his own search for those very lessons. It was much the same during the 18 ½ years he spent at the helm of the Fed, guided by the belief that the U.S. public wants rapid, albeit noninflationary, economic growth. A politically compliant central banker, he has stated in his best-selling memoirs that he believes the independence of the Federal Reserve is not set in stone—implying that there is always huge pressure to keep the growth machine humming. A market libertarian, he has long argued that regulatory intrusion slows the economy. Presto—the rest is history—and an increasingly painful one at that. Greenspan’s blend of politics and ideology led to bad economics and a succession of policy blunders whose severity is only now becoming clear."
and
" Greenspan and his disciple Ben Bernanke saw this situation exactly backwards. America, they insisted, was simply doing the rest of the world a huge favor by absorbing its surplus saving. Serious dollar risks were characterized as a problem for a distant day. Suddenly, that day doesn't seem so distant."
Lastly, you can argue morning noon and night that Greenspan doesn't deserve the blame-
yet President Hoover didn't cause the Depression but he was blamed for it anyway.
Greenspan will be the scapegoat for the financial mess we are in, whether he or his supporters like it or not.
"The Ayn Rand enthusiast"? I think not. It is precisely Greenspan repudiation of his single objectivist essay on the gold standard that has gotten him and the whole world in trouble.
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