Greenspan Says His 'Friends' Got The Financial Crisis Right - And Trades Barbs With Michael Burry (VIDEO)

In a New York Times op-ed yesterday, Michael Burry, the reclusive hedge-fund manager profiled in Michael Lewis's best-selling "The Big Short," lambasted former Federal Reserve Chair Alan Greenspan and his colleagues, claiming that they "either willfully or ignorantly aided and abetted the bubble."

Burry, who was trained as a medical doctor and suffers from Aspberger's syndrome, placed huge bets that the subprime market would collapse and helped make his investors many millions.

Greenspan responded to Burry's op-ed in an interview on ABC News's "This Week," where he told Jake Tapper that while almost everyone failed to predict the implosion of the subprime market and while some people predicted it by chance, there was a "very small group, most of whom are my friends, who got it right, for the right reasons." Burry, he said, may well have been one of those people:

"I don't know whether or not he is in that extremely small group... . I know four or five people who are really good. I don't know six, seven, eight or nine."

In an appearance on Bloomberg Television last week, Greenspan insisted that Burry's successful prediction of the subprime crisis was a "statistical illusion."

Burry, for his part, says that Greenspan "should have seen what was coming and offered a sober, apolitical warning."

But that's not what happened. And, peculiarly, in the years since the subprime market imploded, Burry says policymakers have shown little interest in understanding how or why he was able anticipate the timing of the crisis with such accuracy. Rather than a simple dismissal of those who got it right, Burry argues:

"Mr. Greenspan should use his substantial intellect and unsurpassed knowledge of government to ascertain and explain exactly how he and other officials missed the boat. If the mistakes were properly outlined, that might both inform Congress's efforts to improve financial regulation and help keep future Fed chairmen from making the same errors again."

Watch Greenspan discuss Burry in this clip from his appearance on "This Week" yesterday:

Comments

[Mcatter]

07:02 AM on 04/08/2010

Alan

you can no longer talk around your failings. On one hand you admit that a very small group of your friends got it right. You go on to say how adroit they are and how good they are because they always get it right. Then you say you got it wrong.

Question....if they truly were your friends, were you still friends at the time. You knew what they were doing yet you closed your eyes and did nothing. Shame on you...time to fade away, your legacy is tarnished beyond recovery. Lies damn lies. Reminds me of what you said about Brookley Barns back in 1997 when she warned you about derivatives...then came LTCM. You are a disgrace.

[walterallenhaxton]

06:15 PM on 04/07/2010

Leave the poor old man alone. He knew and said 50 years ago that rubber money was the problem. It still is. http://www.usagold.com/gildedopinion/greenspan.html

[Carl Caroli]

09:19 AM on 04/07/2010

You blew it Al. Now fess up, apologize and get out of my face.

[flabingo]

03:21 AM on 04/07/2010

just finished Zukerman's book, Greatest Trade.
Great book.He gives credit to Burry as being the first person to step up, ahead of John Paulson.
Greenspan has always been "BOUGHT AND PAID FOR" HIs willingness to work for Paulson confirms that! Greenspan should be held accountable for a great deal of the problems in the financal structure. No regulation! and owned by the rich and pwerful.

[Skyblue22]

02:13 AM on 04/07/2010

The only hope that the Maestro has is that A380 Ben causes more damage to democracy. And this is quite possible.

[ZiloRS]

10:13 PM on 04/06/2010

I still remember my high school economics teacher told our senior class some years ago that Alan Greenspan was one of the smartest guys around and we should trust him...And then the economy melted down and Greenspan gave us the equivalent of "who would have thought that bankers were greedy and couldn't regulate themselves?!" I will never forget that.

And now I doubt everything I was told in high school because now I realize how many of my teachers were conservatives and how the world doesn't resemble very much of what they told us it was like. In many cases, they simply had no idea what they were talking about but were really good at BSing, I now see. I'm sure they were smart guys, just...completely wrong. Would have been nice to know that then.

[sparafucilli]

10:10 PM on 04/06/2010

Greenspan and his Fed cohorts were off luxuriating in the deep end of the pool while the plug was failing and the shallow end was drying up. Finally what was clogging the drain gave way and behold the big economic suck. Burry, with his simple water wings, took out drought insurance and got out quick. What is needed are economic life guards that aren't constantly wearing nose plugs.

[beartrack]

09:57 PM on 04/06/2010

In any successful criminal enterprise there has to be an insider that helps. That was Greenspan's role in all this. He is just as much at fault as anyone in the country.

[MrOctober]

09:15 PM on 04/06/2010

Greenspan explaining how is econimc policies were effective sounds like Cheney explaining how the Iraq War was a success. There's no amount of explaining that can change the utter disaster and catastrophe that resulted from Greenspan's economic philosophy.

[killben]

02:46 PM on 04/06/2010

Why listen to this idiot who has brought such a calamity on the world.
This guy should be castigated if he opens his mouth

[doneflyin]

12:24 PM on 04/06/2010

Well, I would certainly like to know the names of those 4 or 5 people!
That's all you need. The herd is always wrong as they just do monkey see, monkey do.

All I want to hear from this old cr**k is those names.

[stargazer13]

11:54 AM on 04/06/2010

Dear Mr Greenspan

I do not believe a word you say !! I have watched you play in the sand box and your always throwing sand in our eyes !!

people tried to warn us and you and your buddies with media,s help made them look like they were crazy remember ! I do !!

[marijam]

11:50 AM on 04/06/2010

I've seen the Greenspan fixation a lot in my work. The people who have been working with something for the longest become complacent and make assumptions that things will continue the way they always had. A new set of eyes, or a set of eyes that isn't arrogant and over self-confident, the person that allows a bit of doubt to flavor their attitude, will often catch things that the most familiar people overlook, or don't care about.

It was easy to see that something strange was going on from the "ground" view. Family members would drive by the new developments and turn and say to each other, "where's the money coming from?" "Where are all these people working that they can afford these houses?" We weren't insiders, so we didn't know then what we know now, those of us who have read the articles and the books, or who were on the end of one of the subprime lenders trying to force us into subprime mortgages.

[HenryDavid]

12:13 PM on 04/06/2010

"Family members would drive by the new developments and turn and say to each other, 'where's the money coming from?' "

That's exactly what I wondered, too. The new building was everywhere. "Where is this money coming from?"

So, now we know what we had already imagined--it was all bogus.

[Albert Amato]

12:36 PM on 04/06/2010

If you lived by the old rule of purchasing a house with no more than 2.5 to 3 times your income, you would not have fallen into the credit trap.......stay a renter until you comply with that rule.

[zingdaddy]

03:26 PM on 04/06/2010

But that wouldn't have helped many homeowners who are now in trouble. One of my employees used that rule in 2004. They can still easily afford their home, and they have a good mortgage. They're good savers, they don't have any other debt. They pay their bills on time, in full, and live within their means. Everything should be hunky-dory, right? However, the home is now $200k underwater and still dropping in value.

They bought into a good neighborhood, but with the downturn, local landlords got desperate for tenants, and started renting to drug dealers, sex offenders, and the like. That drove out the rest of the good tenants. The neighborhood changed within a matter of months. They can't get out; they can't sell, rents won't cover even half of their costs, and even though they can afford it, the property is ruining their credit.

They're considering handing the keys back to the bank to save their lives, and so they can start repairing their credit.

So if you're thinking that following your rule will help you, think again.

[walterallenhaxton]

08:22 PM on 04/07/2010

People don't buy according to the price of the house. They buy according to the payments. If they are 28% of your income it looks like a good deal to them. After all they can afford that. When the FED pushes the money out to the banks , Congress, the FED and Acorns lawsuits can put them out of business so they do what they know that the powers that be want done. I know that is not called regulation but it still is governmental force directing the actions of banks. Add in an artificially low interest rate and you get low payments on big loans. That gives you sales. Add in teaser rates and you get customers who only intend to pay the loan until they go up. Put out some adjustable rates and you get fools who hope that the rate does not go up too much. Fat chance. Then put the Government in there guaranteeing that everyone will get paid no mater what.
So we have bankers who have been given orders.
We have honest people fooled by the price.
Guilty borrowers who never intend to see out their
contracts which might just be a wise stratagem.
Then we have fools who will always be with us.
There never was any free market activity here. It was all managed by Greenspan, his cronies and the Government.
Sure Greenspan is guilty as hell but he is just a government front man.

[buzzy bill]

11:46 AM on 04/06/2010

I would like to get a look at Greenspan's and Rubins financial statements 6 months before the crash and 6 months after. I'll bet they were shifting there millions into safe positions such as treasury notes and high quality bonds. There were too many hedge fund managers that made billions betting the market would collapse.

[mrspiffy]

11:13 AM on 04/06/2010

Maestro..please put down the baton.

http://yieldpig.blogspot.com/