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[Washington Babylon]

Alan Greenspan: The maestro has no wand

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From today’s Washington Post:

It’s been nearly a decade since Greenspan’s stock hit its all-time high with the now-famous Time magazine cover during the Asian financial crisis — the one that featured Sir Alan, Bob Rubin, and Larry Summers as “The Committee to Save the World.” Since the committee disbanded, however, its members haven’t fared so well. Summers managed to get himself hired and fired as Harvard’s president, Rubin helped to steer Citigroup into the ditch, and Greenspan laid the foundation for the worst financial crisis since the Great Depression.

Okay, so nobody’s perfect. But instead of acknowledging that he let his free-market ideology cloud his judgment as monetary steward and financial regulator, Sir Alan is out there trying to convince people how much better off they are because of deregulation, globalization and the dramatic booms and busts they have spawned. He reminds me of the politician who, having just been trounced in an election, blames it on the fact that his message “just didn’t get through.”

What’s so remarkable is how Greenspan can spin out his analysis without mentioning his own role in the creation of the massive housing and credit bubbles that got Fannie and Freddie into their current predicaments. Reading or listening to him, you’d never know this was the Fed chairman who kept interest rates too low for too long, who denied that there was a housing bubble until it burst and who refused to use the powers given to the Fed by Congress to prevent abusive practices by mortgage lenders and brokers… Nor would you have an inkling that this was the same regulator who didn’t notice that the banks under his supervision were moving hundreds of billions of dollars of assets into off-balance sheet vehicles for the sole purpose of evading regulatory capital requirements and keeping them hidden from investors.

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