Thursday, October 23, 2008

Greenspan defrocked: Congress takes him apart and rightly so; he ran Fed on personal ideology

Congressional members of both political parties -- facing angry constituents and re-election races back home -- unloaded an American financial icon Alan Greenspan in a way he never experienced in his 18 years as chairman of the Federal Reserve.

In the end, his excuses and ranging rationalization of his failures to warn the American people of the coming economic catastophe left him looking beaten and very old. His regal omnipotence he regularly flashed before Congress and in selling his life story vanished. He knew his place in history is now as a failure, a culprit and wrongdoer in the annals of American economics. Move over, Herbert Hoover.

Now the nation's news media -- wedded to their left and right ideologies -- won't describe today's congressional hearings on regulation oversight in this way. Conservatives love Greenspan for allow unbridled greed to carry the day and the nation. Liberals are protecting one of their own since Greenspan is married to NBC's Andrea Mitchell.

But the kind of responses that Greenspan was reduced to saying back to congressional questioners came from finally being caught, to being shown you have no clothes, that you misjudged the most incredible economic calamity since the Great Depression.


"We're not smart enough as people."

"Forecasting never gets to be 100% accurate."

"I have to go back and refresh my memory."

Does that make you feel good about the system of oversight that's supposed to protect investors? It shouldn't. O, how the powerful have fallen in the weakness of their convictions and the depravity of their excuses.

Time and again, committee members read Greenspan back his own words from this decade and the previous one. At one speech, he promoted adjustable rate mortgages that sank Wall Street. He even told USA Today that he stood by his speech. But today, he claimed he did not mean it, or meant it in a very limited sense.

A 1994 GAO report pointed to financial derivatives as a danger. Greenspan says that report still is wrong.

The SEC and even his own staff produced warnings. He set them aside.

Instead, congressional members uncovered in Greenspan's writing and his arrogance a personal ideology by which he ran the Fed as an American king, not a public servant. Greenspan wrote that he was committed to a libertarian ideology of government keeping its hands out of the markets. Did you ever vote for that ideology at the ballot box? Libertarian candidates usually get about 1 percent of any vote.

Yet Greenspan weakly responded, claiming a free market will always punish wrong. And Rep. John Sarbanes of Maryland pounced:

"You conceded a flaw in your ideology but you have not conceded that the market will not punish wrongdoers. Like a bad driver, they'll have a wreck one day. But a lot of people can be hit (in that wreck) as bystanders. That's how a lot of the American people feel."

And it is how Greenspan rightly feels now after today's hearing. His legacy is a wreck just like the investments of households across this country.

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