It was only a matter of time before it happened: Alan Greenspan has come to the defense of JPMorgan Chase.
Yes, the Alan Greenspan, the same man who helped make it possible for banks like JPMorgan to get big enough to annihilate the financial system. The same man who made it easier for those banks to shoot craps with their spare cash while also holding federally insured deposits. The same man who kept derivatives from being troubled by regulation, in the name of market efficiency.
The very man, in other words, who is as responsible as any other human being alive or dead for the financial crisis that affects us all to this day. And he apparently wants to have another one, because he still sees absolutely nothing wrong with any of this, if a new interview with CNBC is any guide.
The truly remarkable thing about this story is that Greenspan, rather than being driven from society to live the rest of his days in the wilderness foraging for roots and berries, continues to find people to listen to what he has to say, despite his being utterly discredited.
Nonetheless: Greenspan was recently asked by CNBC for his opinion about JPMorgan's loss in the credit-derivatives market, initially measured at about $2 billion but recently estimated to have crossed $4 billion. Greenspan responded that it was mere pocket change for JPMorgan, a pittance for a bank with almost $200 billion in equity.
And so it is. Had Greenspan simply clammed up at that point, he would not have drawn the attention of the irony gods waiting to hurl lightning bolts at him for his latest bout of un-self-aware nonsense, but Alan Greenspan is not the type of man who will shut up! Ever! Never ever ever!
No, Alan Greenspan had to keep on going, like he does, and explain how JPMorgan's big loss in credit derivatives is a sign that the invisible hand of the market is in control of the universe, and that, in a lake of eternal fire somewhere, Ayn Rand is smiling:
"My point is that you have to recognize that banks will lose money on occasion," Greenspan said, "because that's the way the system eliminates unproductive capital. Implicit in creating growth and productivity comes some degree of failure. If you have banks that are 'too big to fail', it implies you are using the government as a buttress to prop up otherwise unproductive failing institutions."
At which point the irony gods began to hurl their lightning bolts at Greenspan, but they were so blinded by their rage at him that they missed him entirely, leaving him free to continue to spout his dangerous hogwash.
There is absolutely nothing wrong with investment banks taking risks and allocating capital, as they have always done. But when those investment banks are fused together with federally insured deposit-holding commercial banks to form capital-destroying cyborgs -- as happened in the 1990s under the approving gaze of then-bank regulator Alan Greenspan -- the idea that this is any sort of pure capitalism becomes a joke. Bank risk-taking immediately becomes backstopped and subsidized by the federal government. Not only is capital no longer being allocated efficiently, it makes the ghost of Ayn Rand cry.
In a way you could almost feel sorry for Alan Greenspan, whose Randian ideals have apparently not been tempered by reality. You could almost see him as a harmless throwback, tilting at imaginary windmills. That Greenspan, you could almost think, what's he going to say next?
Except his worldview is still embraced by people taken far more seriously than he is: People like Michael Bloomberg and Blackrock CEO Larry Fink, who have also recently defended JPMorgan's loss with similar arguments. People like JPMorgan CEO Jamie Dimon and all of his peers, who still do not see the virtue in breaking up the banks that are too big to fail and driving the casinos out of deposit-holding banks.
It's still Alan Greenspan's world, and we still live in it.