Thursday, October 23, 2008

Alan Greenspan Admits He Isn't God

For far too long, Alan Greenspan was considered a financial deity for leaders on both sides of the aisle. He was there for Bush Sr., Bill Clinton and until Bernake stumbled in, for the current failure-in-chief. As the head of the Federal Reserve Board, Greenspan helped direct and advocate for deregulation in the market. Unfortunately for the great majority of us, politicians happily followed his advice and were paid handsome rewards by the financial sector. Now that we are seeing the consequences of those policies reverberate through the economy everyone is looking for answers, even the man who had the wrong ones for all these years.

From The NY Times:

Although he defended the use of derivatives in general, Mr. Greenspan, who left office in 2006, told members of the House Committee of Government Oversight and Reform that he was “partially” wrong in not having tried to regulate the market for credit-default swaps.

But in a tense exchange with Representative Henry A. Waxman, the California Democrat who is chairman of the committee, Mr. Greenspan conceded a more serious flaw in his own philosophy that unfettered free markets sit at the root of a superior economy.

“I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms,” Mr. Greenspan said.

Referring to his free-market ideology, Mr. Greenspan added: “I have found a flaw. I don’t know how significant or permanent it is. But I have been very distressed by that fact.”

Reading these words, I have to shake my head in disbelief. How can someone that is considered so smart not know that the greed of the rich will ultimately bring us all down in flames? Putting a value on debt that is worthless is absolutely ridiculous when the chance of it crumbling is greater than a house of cards exposed to the wind.

I honestly do not think Mr. Greenspan is such a fool, he should most certainly be aware of what his tenure has helped to "accomplish" in our country over the last twenty years. Greenspan must certainly have made quite a deal of wealth in his time with his policies that have made so many of us poor. Deregulation stripped away the protections in the market that were instituted to prevent the crisis of the Great Depression. They were put there for a good purpose Mr. Greenspan and the only reason to get rid of them is to re-enact the boom of the 1920s while recklessly disregarding the consequences in the 1930s.

Now it does not please me to see Greenspan's heavenly aura stripped away in such a manner that Waxman provided today. He certainly deserved it but the truth is that he should have never been given the throne that was given to him by either party.