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The NYTimes ran an article today entitled: "Greenspan Concedes Error on Regulation" and it seems like the economic geniuses amidst us have claimed some sort of intellectual victory in Greenspan's concession. Here's Alan's quote in the article:

“I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms,” Mr. Greenspan said.

Referring to his free-market ideology, Mr. Greenspan added: “I have found a flaw. I don’t know how significant or permanent it is. But I have been very distressed by that fact.”

Mr. Waxman pressed the former Fed chair to clarify his words. “In other words, you found that your view of the world, your ideology, was not right, it was not working,” Mr. Waxman said.

“Absolutely, precisely,” Mr. Greenspan replied. “You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.”

Have we as "Ladies and Gentlemen" stooped so low as to kick a guy when he's down? I doubt that a capitalist of Alan's tenure completely changes his stripes, particularly with 40 years of success and tremendous wealth creation behind him. He looks at the current meltdown empirically, adjusts his worldview, and suggests new regulations to address unchecked greed and profligate behavior all around, and gets back to business.

I doubt very much that any of the armchair quarterbacks currently pointing fingers have anywhere near as much understanding of what really drives the economy as he does. And sure, he's learning in real time (as we all should be) how this organic beast that is our macro economy actually behaves in totally unprecedented conditions.

Corrections happen as a matter of course, and our financial engineering has tried to smooth out corrections in favor of long term stability... but we cant foresee every unintended consequence of every financial instrument that has provided the average American with so much in the way of economic wellbeing. The aggregated portfolios of risky assets got huge, and the bigger they are, the harder they fall. But ask anyone who has lived within his/her means if they are in bad shape right now.. i doubt it. They're buying foreclosures with cash because an entire society at all levels was living above its means!

Instead of looking for quick fixes, simple answers and scapegoats, can we all ask ourselves what we individually have done to contribute to our cultures excesses? Mr. Waxman?? Even Saturday Night Live picked up the scapegoating going on.. and economic policy should be governed by data, research, analysis, and intellectual rigor... not reactionary sentiments driven by political ambition. Mr. Greenspan, thank you for being an example of a stand-up, mature leader accepting your hand (whatever it may be) in the current mess.. I wish more folks in the Beltway, Wall Street, and Main Street would follow your lead.

This entry was posted on 10.23.2008 at 16:48. You can skip to the end and leave a response.