Posted Oct 24, 2008 12:07pm EDT
Amid the high drama on Wall Street, there was great theater in Washington D.C. this week as Alan Greenspan actually admitted the free-market, anti-regulation ideology that guided his tenure as Fed chairman was "flawed."
With financial institutions worldwide imploding amid what he called a "once-in-a-century credit tsunami,'' Greenspan was surprised to discover banks and brokers failed to regulate themselves.
"Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself included, are in a state of shocked disbelief," he told the House Committee on Oversight and Government Reform.
Greenspan's mea culpa failed, however, to address an even bigger failing: His continued argument that no one could have seen the housing bust and related credit crisis coming, when various and sundry pundits predicted it for years.
From his inability (or refusal) to identify and try to deflate bubbles in tech stocks and then housing, to his blind faith in deregulation and derivatives, as well as generally easy money policies, Alan Greenspan's mistakes as Fed chairman are legion.
We're all paying the price for Greenspan's mistakes and he's yet another "hallowed institution" that's crumbled in recent years.
But to blame Greenspan for everything is wrong. Whether it was Democratic support for Fannie/Freddie, Republican desire for deregulation, Wall Street greed, feckless rating agencies, predatory lenders or irresponsible borrowing by homeowners, there's plenty of blame to go around.
It takes a village to make a financial crisis of such epic proportions. Until policymakers and pundits stop pointing fingers at the "other side," it's unlikely we'll see a resolution of this mess anytime soon.
