Former Federal Reserve Chairman Alan Greenspan said a ``once-in-a-century credit tsunami'' has engulfed financial markets and conceded that his free-market ideology shunning regulation was flawed.
``Yes, I found a flaw,'' Greenspan said in response to a grilling from the House Committee on Oversight and Government Reform. ``That is precisely the reason I was shocked because I'd been going for 40 yearsor more with very considerable evidence that it was working exceptionally well.'' -Bloomberg News
What I don’t understand is how right I was and how wrong a guy who supposedly has the cred turned out to be. Heck, most Democrats were right, except for those who were tempted by the free market mythology. Looking back…
In May 2005 speech, Greenspan said that ``private regulation generally has proved far better at constraining excessive risk-taking than has government
regulation.''
Greenspan reiterated his ``shocked disbelief'' that financial companies failed to execute sufficient ``surveillance'' on their trading counterparties to prevent surging losses. The ``breakdown'' was clearest in the market where securities firms packaged home mortgages into debt sold on to other investors, he said.
Wait a minute: Is Greenspan saying greedy free market investors only thought about short term gain and to hell the long range consequences? I’m shocked. What amazed me were the partisan Republicans who were still beating the "Democrats are the deregulators" drum. I thought Democrats never saw a regulation we didn’t like? For the record:
Greenspan opposed increasing financial supervision as Fed chairman from August 1987 to January 2006. Policy makers are now struggling to contain a financial crisis marked by record foreclosures, falling asset prices and almost $660 billion in write downs and losses tied to U.S. subprime mortgages.
Then there's this from AP:
Badgered by lawmakers, former Federal Reserve Chairman Alan Greenspan denied the nation's economic crisis was his fault.
Greenspan, 82, acknowledged under questioning that he had made a "mistake" in believing that banks, operating in their own self-interest, would do what was necessary to protect their shareholders and institutions. He said the current financial crisis had "turned out to be much broader than anything that I could have imagined." On the billions of dollars of losses suffered by financial institutions because of their investments in subprime mortgages, Greenspan said he had been shocked by the failure of banking officials to protect their shareholders from their bad loan decisions.
"A critical pillar to market competition and free markets did break down," Greenspan said. "I still do not fully understand why it happened."
REST IN PEACE.
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