Greenspan: It wasn't me.
In testimony before the Financial Crisis Inquiry Commission yesterday, Alan Greenspan pretty much adopted the Shaggy defense: Interest rates? It wasn't me. Deceptive lending practices? It wasn't me. Unchecked excesses on Wall Street? It wasn't me. They even got us to deregulate! It wasn't me.
Better culprits, according to Greenspan, included the fall of the Berlin Wall, Congress, developing economies, and systemic complexity. Left unanswered is what would've happened had Greenspan walked out and said that there's a global savings glut powering a housing boom that's being repackaged by a finance sector that has become too complicated to regulate and people should proceed with extreme caution and Federal Reserve regulators should adopt a more jaundiced eye.
Ah, well. On the bright side, I agree totally with Greenspan's formulation for the correct response, which is much more an admission of guilt than his introductory remarks would suggest. Greenspan favors "rules [that] would kick in automatically, without relying on the ability of a fallible human regulator to predict a coming crisis. Concretely, I argue that the primary imperatives going forward have to be (1) increased risk-based capital and liquidity requirements on banks and (2) significant increases in collateral requirements for globally traded financial products, irrespective of the financial institutions making the trades."
April 8, 2010; 8:39 AM ET
Categories: Federal Reserve , Financial Crisis , Financial Regulation
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