Greenspan in the dock
Thursday brought the first of what we expect will be many congressional hearings in which Democrats will, with much hindsight, rake someone over the coals for bringing the economy to its current state of near collapse.
It was former Federal Reserve Bank Chairman Alan Greenspan’s turn last week.
He appeared before the House Committee on Oversight and Government Reform and was grilled about his policies and philosophic underpinnings during the 18 years he was the Fed’s chairman.
Indeed, during that time, he championed low interest rates and little regulation of the complicated derivatives markets.
Now we know that those policies drove the lending practices that ultimately led to the housing crash and the wave of defaults that have brought the world’s financial system to its knees, wiping out trillions of dollars of wealth in the process.
We’ll say this for Greenspan: He didn’t back away from acknowledging his role in the crisis.
“You had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others,” said Democratic Rep. Henry A. Waxman of California, chairman of the committee. “Do you feel that your ideology pushed you to make decisions that you wish you had not made?”
“Yes,” said Greenspan, “I’ve found a flaw. I don’t know how significant or permanent it is. But I’ve been very distressed by that fact.”
Contrast that with the comments of people like Sen. Chris Dodd and Rep. Barney Frank, chairmen, respectively, of the Senate and House banking committees.
Both of them, when warned about the possible failure of Fannie Mae and Freddie Mac a couple of years ago, opted to stick their heads in the sand. Now they both claim, contrary to their public remarks at the time, they have no responsibility for the current mess.
We happen to think there’s plenty of blame to go around, some of it possibly of a criminal nature. We’re not sure, though, what grandstanding congressmen have to offer that is constructive, or that will help get us out of the biggest economic crisis the country has faced in more than 70 years.