Bernanke's Fall from Grace 36 comments
Tim Iacono
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That House committee hearing was about a four-hour ordeal Thursday and I only got through about two hours of it. Apparently, since it fits neatly into their job descriptions, others had to stick with it for the duration, resulting in little more for their efforts than what appeared here yesterday in the transcription of questioning by Henry Waxman (D-California) that opened the session.
The role of government regulators leading up to the current financial crisis was the subject of yesterday's gathering of the House Committee on Oversight and Government Reform and, just in case you're a real glutton for punishment, our government has made the entire transcript available in .pdf form - all 201 pages of it. Your tax dollars at work...
In Friday's WSJ account of what happened, Kara Scannell and Sudeep Reddy noted the same overall tone that struck me - Greenspan Admits Errors to Hostile House Panel.
The title for the story that was filed shortly after the panel concluded went by the name Greenspan Admits Some Mistakes Amid Grilling by House Lawmakers. Apparently, they felt the need to raise the ante for Friday's print edition (the two articles appear to be one and the same).
Anyway, there's an online poll that accompanied Friday's story. I'm not sure if I should be surprised or not about the results - that first question is a little vague.
Maybe if they'd have asked something like, "He is more to blame than any other single person", then maybe the results would have been different. Many would probably respond that the credit rating agencies are more to blame or that homeowners are more to blame without identifying any individual.
Not that the distinction is all that important...
That's the way I've always looked at it, though I must confess that given what has come to light over the last three or four years, it is now clear that he had a lot more help than first thought.
In the WSJ report, it was the closing paragraph that really brings this sad chapter in American financial history to something of a close. As some may have thought yesterday while listening to the proceedings, it really wasn't all that important what the old man had to say anymore - what was more telling was how he was being addressed and how his stature has been so diminished.
The treatment was a striking contrast with one of Mr. Greenspan's last appearances before Congress as Fed chairman, on Nov. 3, 2005. "You have guided monetary policy through stock-market crashes, wars, terrorist attacks and natural disasters," Rep. Jim Saxton (R., N.J.) told him then. "You have made a great contribution to the prosperity of the U.S. and the nation is in your debt."
Quite a fall from grace.
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This article has 36 comments:
A mark of intelligence is being able to recognize the same shit even when it is repackaged.
Perhaps Bernanke and Greenspan should see if there is an opening for the captain of the Exxon Valdees, job requirements: asleep at the switch.
Jim Saxon, you have a promising career awaiting you in the food service industry, you clown.
But aside from the title, I am shocked, SHOCKED, that the bloody glove belonged to Mr. Greenspan. But then again, I am not particularly interested in what happened in the past, I read this site to try and figure out what will happen in the future.
while the reds talk about confiscation by taxation one of the greatest transfers of wealth of all time occurred through the federal reserve by pushing real interest rates negative and holding them there. as far as i'm concerned it was a criminal act. it continues to this day.
greenspan is a pathetic old fool and it showed in his appearance before congress. bernake is an utterly unsuited academic who belongs in the insulated world of academia. neither of these geniuses were able to recognizer the single biggest risk factor facing the economy during their tenure...the underpricing of risk and the unchecked expansion of credit. both continue to this day.
as far as i'm concerned the federal reserve should be absolished. it is more responsible than any single regulatory agency for the collapse of our financial system. far more responsible than the congress, from which one can expect incompetence and pandering. the fed was supposed to be a regulatory body whose primary function is to safeguard the financial system and they ignored that mandate. they utterly and completely failed in that task.
absolish the federal reserve.
Get to the bottom line, what really matters.
WE LOST MONEY !!!
FINE THE GUILTY, THE ONES THAT DIDN"T DO THEIR JOB
OR LET ALL THIS HAPPEN. "Sleeping at the switch"
Make them pay, to minimize the damage
Greenspan 1billion, Bernake 1billion just for a starter
All the former bank presidents and regulators 1 billion each
Garner their wages, confiscate their estate,make them pay !!!
Who was Alan Greenspan? Was he the House majority leader? Did he write any legislation? Was he the President? Did he underwrite derivatives?
No, he was a wizened old man who talked in riddles, and the financial community loved it. He was like the Sensi on the old television show, Kung Fu, and part of his appeal came from his oblique statements which said everything and said nothing.
But the one thing he did do was inspire confidence, and markets need confidence. We have a shortage of confidence in the market because of a risk aversion theory that mortgage backed securities, illiquid in nature, could somehow be not only totally liquid but also AAA quality credit. That had nothing to do with him. If he had exercised caution he would have been crucified in the Wall Street Journal and they would have a more pliable cheerleader in his place.
Greenspan is the diplomatic husband who massaged the truth when his wife (the American public) asked him if she looked fat in the dress. Now everyone is pointing their finger at Greenspan because the American public was a fat credit engorged pig. All America had to do was look in the mirror.
Lots of people saw it coming but people hear what they want to hear. The same people crying about Greenspan's folly are the same people wiring money to scam artists in Nigeria.
You can't use your ignorance as a sword and shield against others when you make wrong bets. Judge Judy would say, grow up, put a period after it and move on. Just go back into your glass house with your stones, drink some warm milk and lie down.
Interest rates should reflect the inflation rate plus 3%.
THIS DID NOT HAPPEN BECAUSE THE US NEEDED
SOMETHING AFTER THE DOT COM DOWNDRAFT AND
IT BECAME THE BLOWN UP REAL ESTATE MARKET
AS THE NEXT BUSINESS MODEL THAT WILL KEEP EVERYONE
IN BUSINESS AND SPENDING..To say that nobody knew
what was going on and for the financial managers to say
nobody knew is wrong. I'm an idiot and I knew the interest
rate rule cited above.....MarvinMBA
Even neo-Keynesian economics was shunted to the side after Reagan came to power and neo-Keynesian economics is not Keynesian economics but only a compromise with neo-classical economics.
Keynesian economics is sometimes called post-Keynesian economic to distinguish it from neo-Keynesian economics but post-Keynesian and Keynesian are the same, more or less and neo-Keynesian economics is a half way house between Keynesian and neo-classical economics.
Greenspan has admitted that he doesn't really understand what is happening (he started out as a disciple of Ayn Rand of course) but Bernanke, who is currently in power, can't admit he doesn't understand it.
But no one who is a neo-classical economist can "understand" a meltdown like this because neo-classical economics teaches that it is theoretically impossible.
Since most government officials are neo-classicals, almost EVERYONE IS TO BLAME.
However, if the world economy turns around then neo-classical economics will be vindicated.
If the meltdown continues and becomes a true crisis and not just a recession, deep or not, only the future will tell us which theories will be tried:
Institutionalism: John Kenneth Galbraith.
post-Keynesian economics = Keynesian economics
neo-Keynesian economics = Keynesian + neo-classical economics
socialism (Government taking over failing industries such as banking, airlines, railroads, etc.)
www.washingtonpost.com...
"What Went Wrong
The meeting of the President's Working Group on Financial Markets on an April day in 1998 brought together Federal Reserve Chairman Alan Greenspan, Treasury Secretary Robert E. Rubin and Securities and Exchange Commission Chairman Arthur Levitt Jr. -- all Wall Street legends, all opponents to varying degrees of tighter regulation of the financial system that had earned them wealth and power."
www.nytimes.com/2008/1...
Agency’s ’04 Rule Let Banks Pile Up New Debt
www.nytimes.com/2008/0...
S.E.C. Concedes Oversight Flaws Fueled Collapse
www.washingtonpost.com...
"The size and nature of this market create a potential for systemic risk to the nation's financial markets that requires vigilance by federal regulatory authorities."
- Brooksley E. Born, chair, Commodity Futures Trading Commission, 1996-1999
Arrived at the CFTC determined to get her arms around the risk posed by the burgeoning growth of derivatives, so called because they are financial instruments that derive their value from other investments.
----------------------...
"Regulation of derivatives transactions that are privately negotiated by professionals is unnecessary. Regulation that serves no useful purpose hinders the efficiency of markets to enlarge standards of living."
- Alan Greenspan, chairman, Federal Reserve, 1987-2006
Opposed regulation of derivatives on free market grounds. Thought the CFTC had no legal authority to do so, and any CFTC proposal would threaten the legality of existing contracts.
Then we can talk about the system we do have.
The CFTC, SEC the FED and for that matter the NCI, FDA and even the IRS and the CONGRESS are revolving door organizations who give big business what it wants.
Sure, there are a few mavericks but the exceptions prove the rule.
Government regulators are about as important as referees in an NBA basketball game (which is not to say, of course, that they are unimportant.)
They are necessary but they are not running, regulating or even affecting the essentials of the game.
When the biggest basketball game of them all melts down and the players start a huge fight that shows no sign of ending, well, the referees had better get out of the way or they will be the first to be taken out on stretchers.
If and when that happens it will be time, unfortunately, to call the cops who are us and not time to blame the referees.
the nation is in your debt
I agree, those who are responsible should have to answer for their crimes, they should lose all of their material wealth, as well as serve time for their misdeeds, just like the punk crooks they are.
But too, we should all take responsibility for our deficiency in running our Government. It is each citizens duty to take an active part in running their Government, be it local, state, or federal, if it be no more than attending school board meetings, voting in every election, and voting responsibly, which means, not being misguided by the main stream media, voting for incompetent incumbents, but taking the time from our busy lives, to research each candidate ourselves, taking the time to use the many resources available to us today, to review the voting records, to substancuate the outlandish personal attacks, to realize we are all fallible humans, and weigh the personal attacks against the present day lives and voting records of each individual candidate.
We all, myself included, have failed miserably in running our Government, this of course, is why we are experiencing the present failed system of a free society.
There simply is no substitute for a free market place, and a free market place does not exist in a Fiat money system, never has and never will. Throughout history governments have attempted to do away with free markets, for the personal gain of a few unscrupulous individuals, and these governments have all failed.
We must do away with the Federal Reserve, Central Banks, and International Bank of Settlements, putting the world finances back into the competitive market place, one, that the best individually owned and operated banks win the people's trust, thus their business.
Our country was established through a very well written Constitution, one that caused a people to unite and create the greatest society this world has ever known, and we need to return to and stay with that concept.
We don't need a financial system controlled by a few very rich unscrupulous individual investors, who have taken command of our Congress, our Supreme Court, our very existence. We need to return to and obey, the very Constitution we were created under, not one that is interpreted by a mindless legal system for their own personal gain, but the one that was written in plain English, by the people for the people. The very constitution that tells us what our monetary system will be, and who will create our money, as is so well researched and put in plain English for us, by Dr. Edwin Vieira Jr.'s Pieces of Eight.
We have, thorough our passive attitude towards our Government, dug a gigantic hole, and we need to stop worrying right now, so much about who caused the hole, and focus on a way to climb out; without being buried within. We are all responsible and we are all going to have to pay.
It doesn't matter if your are for McCain or Obama, what matters is that you start thinking for yourselves, quit being led around like a bunch of mindless sheep, by the Liberal controlled media.
Is it common sense that McCain is spending 128 billion on the war in Iraq? Or is it fact, that Obama is a part of the Congress that allowed this to be done. Is it common sense that Obama can fill the hole with some tax breaks to the lower and middle classes, that pay very little if any tax, or that the corporations be given tax breaks to help create jobs for the poor and middle class to have a monthly income?
The real fact is, that we can no longer allow the Liberals to destroy the very Constitution that we were created by, to destroy the Christian values, of holy matrimony, family, and honest morals in our dealings with each other. Freedom means just that, freedom in a honest market, freedom in worshiping our God, without having to worry about it offending some individual.
Justice must be administered in a fair and impartial way, we must establish confidence in our monetary system, by re-establishing the gold standard. We must quit shooting at each other and bite the bullet. Together we will stand, divided we will fall.
ahhh, now i understand. it must have been a bunch of liberals in charge of all those commercial and investment banks, hedge funds and mortgage companies not to mention the liberals at the federal reserve, the SEC, the FHA, the FDIC, et al. that screwed the pooch. not a conservative to be found among them because they have "good christian values."
i take it you're one of the right wingers with "good christian values" too. are they as good as jimmy "i have sinned" swaggert? remember him? or how about the good reverend jim baker? he loved both nookie and money....maybe even as much as he claimed to love god.
i always thought that greed has no political or religious affiliation. thanks for informing us otherwise.
The artilce is about Greenspan.
America business has another big enemy. It is America's corporate leadership.
First of all, Boards of Directors and management of America public corporations feel no responsibilities for their activities.
Second, the majority of corporate executives loot the corporate treasury and steal from shareholders by rewarding themselves with huge salaries, bonuses, stock options and other benefits. These executives behavior is no different from a bank employee stashing his/her packets with bank money before going home.
Who is to blame? Not just Greenspan, but everyone in the system who subscribed to the same theory.
Greenspeak uttered ?
Now he admits what ??
I always thought he was a ignorant, political,self-serving putz.
However, let's not be to fast in our criticisms---after all, WE were all part of the the same crowd who were happy/elated to see stocks go up...up...and up! "Greed" comes back to haunt us, and those of us who are now suffering, we are paying for our "greed"!
Fortunately, some of us invested (not speculated) in some good dividend paying stocks---while we ride out this "panic selling" or better "almost capitulation where everything is being thrown out to go fos CASH!
What a ridiculous extreme we are now heading to.
jimrogers-investments..../