Are you kidding me? Alan Greenspan told a House committee headed by Henry Waxman today that his analytical structure was wrong. You'd think he merely misplaced a decimal point. He thus alienates his allegedly objective analysis from any other more suspect motive. And, yes, he was shocked that the self-interest of bankers didn't protect their shareholders. He was,admittedly, "partially" responsible.
Of course, it was hardly analysis. It was ideology, and an ideology that especially benefited an advantaged group of Americans.
When Captain Renault told Bogie he was shocked, we and he all knew he wasn't. But Greenspan went on to explain why he really was shocked. This is the kicker. He had forty years of evidence to support his central belief that bankers would act prudently, he told Waxman and the committee members. But that is the ultimate nonsense. We had many financial crises in those four decades, but it was not the workings of free markets that saved the day. Rather, it was the Fed and other central banks who repeatedly saved the financial executives from their frequent excesses.
The assertion from Greenspan about forty years of evidence is the hardest of his rationalizations to take. Does he really believe that these Wall Street pros act prudently when they can make so much money not to? Does he have no awareness of the painful financial history in the 1800s, when there were few financial regulations, and no Fed to save the day? We should have put Casablanca's Captain Renault in charge of the Fed. Greenspan's claims make the blood boil.