The Sadness Of Alan Greenspan

Today our ex-Master of the Universe had his "nobody could have anticipated" moment.

Former Federal Reserve chairman Alan Greenspan called today for imposing some of the same sorts of regulations on mortgage securities he resisted when he was in office, acknowledging that the current financial crisis had exposed "a flaw" in his view of how the world and markets function.

The absence of significant controls on how mortgages are repackaged into larger and more complex securities has been cited as a central cause of the current financial crisis.

In testimony before the House Government Oversight Committee, 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.

Under questioning from Rep. Henry Waxman (D-Calif.), the committee chairman, Greenspan acknowledged that the failure of that expected self-regulation represented "a flaw in the model" he used to analyze economics. "I was going for 40 years or more on the perception that it was working well."

Here's that key moment.



Is he really this stupid? He predicated his entire economic philosophy on the premise that greedy people wouldn't act greedily? This free market fundamentalism might work in computer simulation, but in the business world you pretty much have people who want to get ridiculously rich as a matter of projecting power. Also, to suggest that Greenspan had just nothing to do with hyping adjustable rate mortgages and deregulation is absurd. This is his problem and he ought to be slow roasted for it.

If men were angels, no laws would be necessary, to borrow a phrase. But regulation exists for creeps like this:

CONVERSATION OF THE DAY....Between Rahul Dilip Shah and Shannon Mooney, a pair of analysts at the credit rating agency Standard & Poor's, chatting via IM back in 2007:

RDS: btw: that deal is ridiculous

SM: I know right ... model def does not capture half of the risk

RDS: we should not be rating it

SM: we rate every deal

SM: it could be structured by cows and we would rate it

I actually don't think Greenspan is this dumb, he just wanted to let the party keep going until he retired or died so he wouldn't have to be pinned with the blame. Tough break, Alan.

Digby is great on this.

Being able to pass on all your risk to someone else while personally coming out on top is a pretty glaring and obvious flaw in the system unless you think that wealthy people are too wise and moral to ever do such a thing. The only people who believe that are Randians and Joe the Plumber. Everybody on Wall Street certainly seemed to know the score and acted accordingly [...]

Uncle Alan is in his 80s and he's just learned that his heroes aren't what he thought they were after all. No wonder he's in a state of "shocked disbelief." It's a wonder he didn't keel over.

I know people are focused on Hank Paulson and what a poor job he's doing, but focus some attention back on this Randian fool Alan Greenspan. He deserves to have his entire reputation destroyed.