Tuesday, October 29, 2013

Why hasn't Alan Greenspan crawled under a rock?

Alan Greenspan doesn't have the decency to just go away, even after he encouraged the housing bubble that burst and caused the 2008 financial panic.  He was chairman of the Federal Reserve Board when the bubble got gigantic, and all he did was cheer it on.

Instead of crawling under a rock, Greenspan is out flogging a new book, to which we will not link because we don't want to encourage it.

The peerless Dean Baker, writing in The Guardian, lambastes Greenspan for causing hardship for millions of Americans and then showing his face in public. Baker doesn't buy Greenspan's excuse that he didn't know about Wall Street's risky speculation:
The explosion of exotic mortgages in the bubble years was hardly a secret. It was frequently talked about in the media and showed up in a wide variety of data sources, including those produced by the Fed. In fact, there were widespread jokes at the time about "liar loans" or "Ninja loans". The latter being an acronym for the phrase, "no income, no job, no assets".
Most of the news media is slavishly reporting Greenspan's denial he knew what was going on. Here's how close Alan Greenspan is to the media: he's married to MSNBC anchor Andrea Mitchell.

Greenspan is likely to be interviewed by the same 'journalists' who whine that JPMorgan is being persecuted because it has to pay a fine. The fine is a small fraction of JPMorgan's earnings, and it's punishment for destroying the financial security of millions of Americans.

Anyhoo, Baker explains how Greenspan was in the best position to stop the bubble's growth:
Suppose that, instead of extolling the wonders of adjustable rate mortgages, Greenspan used his public addresses to warn people that they were buying into an overpriced housing market; and he warned investors that the subprime mortgage backed securities they were buying were filled with fraudulent mortgages. Suppose further that he used the Fed's research staff to document these facts. 
Greenspan could have used the regulatory powers of the Fed to crack down on the bad mortgages being issued by the banks under the Fed's jurisdiction, as his fellow governor Edward Gramlich urged. And, he could have arranged to have a meeting with other federal and state regulators to see what they were doing to prevent mortgage fraud in the financial institutions under their jurisdictions as well.
Instead, he did nothing. As a result, the United States has 9 million fewer jobs than it would have had without the financial crisis. Millions of families lost their homes to foreclosure. Older workers lost their jobs with little hope of replacing their previous income. Young people face the worst job market since the Great Depression, and many of them carry tens of thousands of dollars in student loan debt.

Thanks, Alan. Now please go away.