by William Neikirk
Alan Greenspan is my hero today. He had the guts to admit he was wrong. You rarely hear this in Washington. Here, taking responsibility is considered something that one does not do.
The former Federal Reserve chief conceded that the crisis developing from too much debt in the sub-prime mortgage market left him with "shocked disbelief." He basically said he miscalculated.
Surely his reputation is now in tatters. One cannot help but have some pity for him, for he is a very serious man with great principle.
Yet, one would be truly justified in feeling deep anger because he was the man who set himself up as an expert in control and his own ideology poisoned his judgment. And he has to shoulder a healthy amount of blame for the deep recession now unfolding.
But to me, it was a heroic thing for him to do and very useful. Now, the public has it from the "maestro" himself that overly light regulation causes capitalism to go too far and cause systemic risk. Now we can move on.
Now, every time an ideological advocate of self-regulation in markets insists that this model should continue, most people will respond, "Yeah, that's what Alan Greenspan thought, too."
We truly need to extricate regulation from this political cesspool. There is such a thing as too little regulation. There is also a thing as too much regulation. You can coddle markets and you can stifle them. The right balance is hard to find, but it must include good judgment and an common-sense approach.
Greenspan, though, isn't solely responsible. The concept of self-regulation has been around for many years, and it was practiced during the Clinton years as well as during the Bush years. When the Commodity Futures Exchange Commission tried to crack down on too much leverage in stock market derivatives during the Clinton administration, the Treasury Department and Greenspan protested and prevailed.
Now, we know, the commission was right. And now we have a big challenge of finding the right amount of regulation that will ensure that such a crisis will never happen again.
Greenspan, however, did not back away from what many people conceive as another error--holding interest rates too law for too long and setting the stage for a housing boom that got out of hand. I am not holding my breath that he will confess to this mistake.
But let us all rejoice for what he has done--admitted a major mistake. Now, we can only hope his example spreads in a capital where errors hide behind self-serving ideology.
Comments
I think Greenspan does deserve some credit here, but what does it say that we have to praise a government employee that tells the truth? What a sad state of affairs DC has turned into.
Posted by: xcellentform | October 24, 2008 11:31 AM
Here's an idea. Instead of relying on what republicans think "the right amount" of regulation should now be, since they were wrong about us having absolutely no regulation and it has practically destroyed not only our economy but markets worldwide, we instead let democrats decide. Seems fair to me.
Posted by: Grandblvd03 | October 24, 2008 12:00 PM
Here's an idea. Instead of relying on what republicans think "the right amount" of regulation should now be, since they were wrong about us having absolutely no regulation and it has practically destroyed not only our economy but markets worldwide, we instead let democrats decide. Seems fair to me.
Posted by: Grandblvd03 | October 24, 2008 12:00 PM
Let the Dems decide? The DEMS have been deciding, and making some really bad decisions for some time now...
^^^^
How do you rationalize all of the failed attempts to regulate Fannie and Freddie that, if successful, would have minimized if not avoided this credit meltdown. Lack of regulation is not the cause of this - lack of GOOD regulation is the cause.
^^^^
Keep in mind- DEM leaders in congress are the ones who pushed back on attempts by both the Bush admin and McCain to install tougher oversight regulations on the failed GSE's...
^^^
At the same time that the Messiah was gaining much campaign money from the GSEs...
Now he gets to be president?
Wow- go figure...
Posted by: heartburn | October 24, 2008 2:08 PM
"DEM leaders in congress are the ones who pushed back on attempts by both the Bush admin and McCain to install tougher oversight regulations on the failed GSE's"
PROOF please!
Greenspan should make restitution. I'd like to see his assets seized to repay the taxpayers for the bailouts. Contrition is fine, but absolution requires action.
Posted by: athena | October 24, 2008 6:46 PM
Are you kidding. He absolutely did NOT admit he was wrong. He spent his entire term interfering in free markets.
First by setting interest rates way below what market rates would be, causing a artificial boom. Plus he bailed out financial mistake after financial mistake.
He is absolutely the main cause of this crisis.
The purpose of the Fed is to prop up fractional reserve banking, which is the ultimate cause of the business cycle. Instead fractional reserve banking should be outlawed as fraud.
The current Fed chairman is no better. His solution to a problem caused by pumping too much money into the system is to pump more money into the system.
Why don't we all just become counterfeiters. It would have the same effect but have the benefit of at least spreading the new money around more evenly, instead of just fat cats getting the freshly printed cash.
They will NEVER admit their mistake of trying to control the markets.
Posted by: Brian Macker | October 24, 2008 8:09 PM
I thought something was put in place after the depression.My financial advisor hasn't called lilke he has been. I have lost all the way back to my original investment. his sorry means nothing to me. i will lose all my money, getting close to losing medicare which isn't all it's made out to be for a person in a nursing home and am losing my insurance thru work you tell me.
Posted by: Sue Cogswell | October 29, 2008 2:14 PM
please spread the word he is or was a democrat
Posted by: MIKKIE BEST | October 31, 2008 8:56 PM