Thursday, October 23, 2008

"The leading banker in Amsterdam is now the pastry chef in our kitchen."

The Washington Post has a story on former Federal Reserve Chairman Alan Greenspan:

In testimony before the House Committee on Oversight and Government Reform, Greenspan said that, as a result of the current situation, the United States is heading for a "significant rise in layoffs and unemployment" and a continued downturn in home values as the world works through a crisis that is "broader than anything I could have imagined."

Greenspan, who called the current financial crisis a "once-in-a-century credit tsunami," said that he remained "in a state of shocked disbelief" that banks and investment firms did not do a better job of analyzing the risks involved with investing in home mortgages extended to less creditworthy borrowers.
Greenspan's impression of Casablanca's Captain Renault ("I'm shocked, shocked to find that gambling is going on in here!") in responding to the financial crisis would be amusing, if he hadn't helped to create the conditions for it.

As Dale points out:

To call Alan Greenspan a true believer in the god of market fundamentalism would be akin to calling Moses a true believer in the god of the Old Testament -- he was on the scene as the plates were etched, inhaling the very vapors rising from the burning bush.
Whatever Greenspan inhaled, coming down from that trip is a definite bummer.

From the IHT:

Pressed by Waxman, 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," Greenspan said.

Waxman pushed the former Fed chief, who left office in 2006, to clarify his explanation.

"In other words, you found that your view of the world, your ideology, was not right, it was not working," Waxman said.

"Absolutely, precisely," Greenspan replied. "You know, that's precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well."

Your cash, Alan, is good at the bar.

And you're lucky the bar's open to you.

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