In May 2005 speech, Greenspan said that ``private regulation generally has proved far better at constraining excessive risk-taking than has government regulation.''
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Greenspan opposed increasing financial supervision as Fed chairman from August 1987 to January 2006. Policy makers are now struggling to contain a financial crisis marked by record foreclosures, falling asset prices and almost $660 billion in writedowns and losses tied to U.S. subprime mortgages.
Today, the former chairman asked: ``What went wrong with global economic policies that had worked so effectively for nearly four decades?''
Greenspan reiterated his ``shocked disbelief'' that financial companies failed to execute sufficient ``surveillance'' on their trading counterparties to prevent surging losses. The ``breakdown'' was clearest in the market where securities firms packaged home mortgages into debt sold on to other investors, he said.
Who would have guessed this would happen. I'm a big fan of admitting when you're wrong. Alan did. Good.
4 comments:
"I'm a big fan of admitting when you're wrong. Alan did."
gee, that and a couple of $trillion might make a difference
Poorly thought out deregulation...
Why are financial institutions that can expand the money supply regulated? Because of the lever effect if they go down. Capital ratios are not a bad thing.
Collateralizing debt has the same net effect. Increase the money supply by some factor x. Really hide the impact by no longer reporting on money supply, rely on industry self-regulation (with no monitoring of conflict of interest), allow vested interests to rate products without oversight and you have a perfect storm scenario.
Now where the major problem is too much credit; with a consequence on the other side of the ledger of too much debt, we will see a drastic decrease in spending as consumers, businesses and GOVERNMENTS try to shore up their balance sheets.
The problem isn't the downturn, the problem is in the artificial upturn that was caused by a belief in the unfailing markets. Problem was, the markets took full advantage of riskfree money to increase risk throughout the system.
BEMUSED LURKER
I would like to see Greenspan really suffer for what all his expertise has done to so many. A one-bedroom 400 sq ft apartment, that is outrageously priced, would be nice for starters
So Greenspan he admiited he was wrong. About what, exactly?
Neoliberalism? Washington consensus? His life's work? Capitalism?
I wish someone would press him on that question.
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