Thursday, October 9, 2008
Villains and a Heroine
Today's Times has an article on Greenspan's role in the crisis, focusing on his rabid opposition to any regulation of derivatives. Along with Rubin and Summers, he shut down the attempt by Brooksley Born at the CFTC to do something. In retrospect, Rubin claims he wanted to regulate derivatives, but failed to do so because "the industry certainly didn't want any increase in these requirements. There was no potential for mobilizing public opposition." That's leadership, Bob! And Summers called Born and told her that trying to regulate would cause a financial crisis. When Congress finally made it official with Gramm taking the lead - as has been pointed out often-- the fix was already in, thanks to Rubin, Summers and Greenspan. Bipartisanship! An Obama administration should hire Brooksley Born and shun Summers and Rubin like the plague. For shame!
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Two significant Greenspan quotes from the article demonstrate the chutspah that the man can display. Something along the lines of, "What, did I say that? What I really meant was..."
In his testimony at the time, Mr. Greenspan was reassuring. "Risks in financial markets, including derivatives markets, are being regulated by private parties," he said. "There is nothing involved in federal regulation per se which makes it superior to market regulation."
This one comes in a close second,
"In a market system based on trust, reputation has a significant economic value," Mr. Greenspan told the audience. "I am therefore distressed at how far we have let concerns for reputation slip in recent years."
Greenspan is telling us that free men are free to regulate themselves
and that the free market will assure that they do so. Until, of course, they fail to do so. He claims to have had unfailing confidence in the honorable intentions of those in the financial sector, until he lost that faith when those in the financial sector proved not to be so totally honorable.
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