Sunday, March 21, 2010

"Accidents Never Happen" - Everyone To Blame But Greenspan (and Bush and Cheney and Goldman Sachs . . .)

So, everyone is tired and taking a break? We worked so hard. And now everything has blown up in our faces, so we NEED A BREAK. Great. Because right about now is when the rest of the Rovian-directed chaos-ers will begin to come out of the woodwork to tell those rapt Faux Noise listeners (now known as the false-flag group "The Tea Partyers") exactly how right they were all along and how the people at the bottom will eventually benefit if they can just . . . hold . . . on . . . a . . . little . . . bit . . . longer. And to remember how smart David Brooks and Tom Friedman and General Petreus and Dick Cheney and George Bush and Ronald Reagan really were all along and to just put those failed so-called "progressive" doom-and-gloom reporters out of their cotton-picking little minds (or something in that neighborhood).

And if you don't believe me. Just wait. It will happen soon.

Greenspan's conduct was shaped by his anti-government, anti-regulation, laissez faire fanaticism. Regrettably, ideas have consequences, which is why the country is still in a Depression.
Do you believe the financial catastrophe of the Bush/Greenspan/Goldman Sachs years was coincidental with good business practices but bad luck, or have you looked at the evidence and arrived at some darker synthesis? If anyone thinks that Greenspan's looked at his Randian philosophy critically and decided that he should feel some minor culpability or even a little bit of out-right guilt for sinking the world economy, they must be dreaming. I mean what do you think he's been hunkering down for the last two years doing? Penance? Figuring out exactly the words he should use in his worldwide Agnostic's Apologia? Changing his will to benefit those on the bottom of his winners-take-all pyramid that had (and will have for the next several generations) their precious taxes used to finance his friends' casino outings instead of their retirements/hospitalizations? No. He hasn't been doing any of that. What he has been doing (and it's just been unveiled for our viewing displeasure) is: Writing up his excuses - which sound good to his friends and benefactors (I'm betting) - so get ready to have them tried out on you. Mike Whitney hates to see these thieves as all bad. I don't agree. (And try to keep in mind that every time these slicksters attributed something to God's plan that they are all atheists; also that when Greenspan said that "risk was a part of life," he meant your life, not his; and when he used the term "fully hedged," he meant against an eventual taxpayer bailout (not against any of the players who were picking up commissions and bonuses at the crap tables).) (Emphasis marks added - Ed.)
Greenspan is Back

March 19, 2010 Alan Greenspan is back. Maestro is scheduled to appear at the Brookings Institute today to deliver a 48 page explanation of why his low interest rates and regulatory neglect did not cause the financial meltdown. The contents of the ex-Fed chief's apologia have already been released to the press. It's just more finger-pointing and buck-passing; 48 pages of the-dog-ate-my-homework excuses in Greenspan's cryptic Fed-speak.

"We had been lulled into a sense of complacency by the modestly negative economic aftermaths of the stock market crash of 1987 and the dotcom boom. . . . Given history, we believed that any declines in home prices would be gradual. Destabilizing debt problems were not perceived to arise under those conditions." See? It wasn't Greenspan's fault, after all. It was "the savings glut" or the "undercapitalised banks" or some other such nonsense. The bottom line is that everyone else was to blame for everything that went wrong. Everyone except the Teflon Fed chief, that is. Does Maestro really think he can salvage his battered reputation with this phony charm offensive or is he just trying to stay one step ahead of the hangman? Greenspan tries to acquit himself on the main charges; that he kept interest rates "too low, too long", and that his support for deregulation expanded the use of risky financial instruments (derivatives). These are the two main factors which triggered the meltdown. Greenspan defends himself on both counts, although not convincingly. He rejects the idea that low interest rates created the housing bubble because mortgage rates are linked to long-term rates which the Fed doesn't control. That's true, but it's also a poor defense. Everyone knows that tighter monetary policy cools off speculation, forces financial institutions to reduce leverage, and slows credit growth. If the Fed didn't believe that low rates increase spending, than why would they lower rates every time the economy begins to slow down? Interest rates matter! End of story. Greenspan's argument isn't even worthy of a response. It's ridiculous. Greenspan also invokes the "global savings glut" meme which he reiterates at every opportunity. But that's feeble defense, too. Yes, the massive current account deficit is destabilizing and, yes, China and Japan do save "too much" while Americans consume too much, but so what? That's why we appoint policymakers to intervene when necessary to avoid a global crisis. But, of course, Greenspan doesn't believe in regulation, because he thinks the market is the manifestation of God's immortal plan and mere humans shouldn't interfere in its divine workings. Greenspan: “There is nothing involved in federal regulation per se which makes it superior to market regulation.” That sums it up nicely, doesn't it? Greenspan refused to perform his task as regulator because he was morally opposed to regulation. He's been quite consistent on that point. So, naturally, the imbalances and fraud grew until the entire mechanism broke down. It all could have been avoided if Greenspan had done his job. Peter S. Goodman of the New York Times wrote the best indictment of Greenspan in an article titled "Taking Hard New Look at a Greenspan Legacy" (2008) If you haven't read it yet; get a copy. It will convince you that one man - more than any other - was responsible for the current economic catastrophe. Here is an extended excerpt which covers the main points:
"For more than a decade, the former Federal Reserve Chairman Alan Greenspan has fiercely objected whenever derivatives have come under scrutiny in Congress or on Wall Street. “What we have found over the years in the marketplace is that derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn’t be taking it to those who are willing to and are capable of doing so,” Mr. Greenspan told the Senate Banking Committee in 2003. “We think it would be a mistake” to more deeply regulate the contracts, he added. . . . "THE CURRENT CRISIS MIGHT HAVE BEEN AVERTED" . . . “Clearly, derivatives are a centerpiece of the crisis, and he (Greenspan) was the leading proponent of the deregulation of derivatives,” said Frank Partnoy, a law professor at the University of San Diego and an expert on financial regulation. . . . If Mr. Greenspan had acted differently during his tenure as Federal Reserve chairman from 1987 to 2006, many economists say, the current crisis might have been averted or muted." GREENSPAN THE FREE MARKET SAGE: “Risk is part of life.” As the long-serving chairman of the Fed, the nation’s most powerful economic policy maker, Mr. Greenspan preached the transcendent, wealth-creating powers of the market. . . . A professed libertarian, he counted among his formative influences the novelist Ayn Rand, who portrayed collective power as an evil force set against the enlightened self-interest of individuals. In turn, he showed a resolute faith that those participating in financial markets would act responsibly. GREENSPAN VS BERNIE SANDERS Aren’t you concerned with such a growing concentration of wealth that if one of these huge institutions fails that it will have a horrendous impact on the national and global economy?” asked Representative Bernard Sanders, an independent from Vermont. “No, I’m not,” Mr. Greenspan replied. “I believe that the general growth in large institutions have occurred in the context of an underlying structure of markets in which many of the larger risks are dramatically — I should say, fully — hedged.” GREENSPAN ON THE HOUSING BUBBLE: 'No worries' "When Mr. Greenspan began to hear of a housing bubble, he dismissed the threat. Wall Street was using derivatives, he said in a 2004 speech, to share risks with other firms. Shared risk has since evolved from a source of comfort into a virus. As the housing crisis grew and mortgages went bad, derivatives actually magnified the downturn. MAESTRO: "NO REGRETS"Greenspan: “Governments and central banks could not have altered the course of the boom.” (excerpts from "Taking Hard New Look at a Greenspan Legacy" Peter S. Goodman, New York Times) Greenspan's conduct was shaped by his anti-government, anti-regulation, laissez faire fanaticism. Regrettably, ideas have consequences, which is why the country is still in a Depression.
Suzan ____________


Beach Bum said...

I completely agree with the facts about Greenspan, except I lay a great deal of blame at the lazy and deluded American people who, at least from those I see, have come to think our shit doesn't stink and expect free lollipops and bubblegum to fall from the sky.

My grandparents were teenages during the Depression and did not buy a thing until they had money in hand. A credit card was a tool strictly for extreme emergencies and my grandfather busted his ass to pay it off if they did have to buy something like a water heater or stove.

I believe most of us have developed some "illness" where satifaction has to be met immediantly and the credit card companies were all to eager to make us happy. Same applies to the money managers who lost sight that it takes hard work to build companies and that the games they played with all the crap was just glorified gambling.

As much as some say we have changed, once the economy gets back on its feet the public will be whipping out the plastic as fast as possible. Because the bankers and investors are already playing the same games that got them in trouble.

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Suzan said...

I agree with you BB. But you've got to admit that the "lie machine" was operating full tilt for a decade to sell that crap to the American under-educated-on-purpose underclasses.

And it's a trap actually to have so many people angry at others who are perhaps only an economic level or so removed from their own. It's the new racism (economism?) where we can identify easy enemies close to us and not give too much attention to those pulling the puppet strings.

Just my thoughts, of course. Yours are just as valid.

I'm angriest at the ones who made out like bandits - not the ones who are losing their homes - or like me are permanently unemployable because my job(s) is now done overseas by Indians who can live on $50/month (and enriches the corporations immeasureably who send it to them).

And I don't think the money managers ever operated under delusional thinking - they knew what made them their bonuses and got them promoted: doing what their bosses told them to do.

Same applies to the money managers who lost sight that it takes hard work to build companies and that the games they played with all the crap was just glorified gambling.

Thanks for your comments.

It's always a pleasure to read you.

How's that break working out (especially after yesterday's excitement)?


I lay a great deal of blame at the lazy and deluded American people

Jazzbumpa said...

The Tea Party (bowel) Movement has turned me into an anti-populist.

The real key is what you said about "under-educated-on-purpose." When people know what the hell they're talking about, they're much more difficult to hoodwink.

Now our populists think that America was founded as Christian nation, Obama is a muslim, center-right conservatism is socialism, Keyensian economics is idiocy, and Glen Beck is sane.

Where's Tom Paine when you need him?


Phil said...

Greenspan should be tarred and feathered, then lynched. Of course, he shouldn't have to face this fate alone; there are many others deserving of the same.