In a superb front-page article in today's New York Times, "Taking a Hard Look at a Greenspan Legacy," Peter S. Goodman treats his readers to a banquet of former Federal Reserve Chairman Alan Greenspan's oracular pronouncements in favor of deregulating derivative markets -- Yes, those unregulated, absurdly inflated "swaps" and other exotic debt instruments that are largely responsible for crippling the financial system of our civilization.
According to the article, Mr. Greenspan told a Congressional committee in the mid-1990s: "Risks in financial markets, including derivative markets, are being regulated by private parties. There is nothing involved in federal regulation per se which makes it superior to market regulation." Oh, Really? I don't know what history books Mr. Greenspan reads -- maybe he should put down Atlas Shrugged for a moment and read about the causes of the Great Depression, or even the causes of the more recent dot-com bust or the failure of WorldCom, Tyco, Adelphia, etc. Or, better yet, maybe Greenspan should return the "Enron Prize" that "Kenny Boy" Lay gave him in 2000 and read up on the causes of the Enron collapse. I guess it is too much to ask a multimillionaire economist to lower himself and pick up a book about how American society has actually worked in the past, instead of relying on his ideological wet dreams.
Greenspan knows that banking regulations, like the 1933 Glass-Steagall Act, did not come forth because the financial system was humming along, but rather, they emerged out of a financial crisis similar to the one we are experiencing right now.
Goodman's piece shows that Mr. Greenspan is an ideologue. His devotion to the free-market Ayn Rand-Milton Friedman creed is as fanatical as a Conquistador or a Maoist. Although Greenspan refused to grant an interview for the article, he is still gallivanting around the country telling his acolytes at high-paid speaking engagements: "Risk management can never achieve perfection." His assessment of the current financial meltdown is exactly like George Bush's assessment of the damage caused by Hurricane Katrina: "Oops, sorry -- I'll try to get it right next time." Well, that attitude is simply not good enough anymore -- if it ever was. We expect more from our public officials now.
Ironically, the economic crisis Greenspan helped create offers us an opportunity. It comes at the perfect time for an electoral referendum on the disastrous eight-year reign of Bush the Younger and his Republican cheerleaders, as well as a repudiation of neo-liberal, laissez-faire, right-wing ideology that has been rammed down the nation's throat for three decades. I think most Americans now realize that Greenspan's libertarian worldview is nothing more than greed posing as public policy.
And yet with all of the evidence that Wall Street could not be trusted -- the "golden parachutes" for executives who crash their companies, the insider trading and fraudulent over-valuation of stocks, the labyrinthine network of off-shore accounts and "special purpose entities" that look a lot like money laundering, and so on -- Mr. Greenspan, at a time when derivatives were infecting the international banking system like a financial AIDS virus, had this to say in 2004 : "Not only have individual financial institutions become less vulnerable to shocks from underlying risk factors, but also the financial system as a whole has become more resilient."
Those words should be Alan Greenspan's epitaph -- they should be inscribed on his tombstone when he joins Ayn Rand and Milton Friedman in the great free-market utopia in the sky.
The sociologist/economist, James O'Connor, argued long ago that an "accumulation crisis" of the magnitude we're now seeing historically always ushers in a "legitimation crisis" as millions of people slowly begin to realize that the smart white men in pin-striped suit (like Greenspan) who they trusted to run the nation's most important financial institutions have been lying to them all along, and are, in reality, nothing but a bunch of white-collar criminals free of any ethical constraints. That's what happened after the Great Depression: two crises, one economic, the other political. And just look at the behavior of the AIG executives who took a weeklong vacation partying and golfing and getting pedicures and manicures (and who knows what else) at a beachside resort lavishing on themselves $500,000 AFTER receiving the $85 billion bail out from the American taxpayers. What are we to make of people like that? And Alan Greenspan still says we can trust these guys?
No wonder the Republicans do not want us to look back on the recent history that brought us to this point. Given that Ronald Reagan, the free-market avatar who started the ball rolling, appointed Alan Greenspan to be Fed Chair, he, more than any other individual, embodies the market fundamentalist philosophy that has brought the nation to its knees.
Hank Paulson and Ben Bernanke are trying to pretend that they have the situation under control, but this thing is so huge and complex and international in scope they do not have a clue about how to begin addressing the crisis. They're not riding a "tiger," they're chasing a thousand tigers in the middle of a hurricane. They are play acting as if they are running things so the stock market is reassured. Well, today's 678 point drop in the Dow indicates that these men have no credibility, hence, proof that the "legitimacy crisis" continues.
I think it's safe to say that Alan Greenspan will go down in history, along with George W. Bush, as a reckless and radical proponent of failed laissez-faire policies, as well as one of the worst public officials in American history.