Greenspan and Co. Describe Wall Street 'Tsunami'
Today's congressional hearing on the "actions and inaction of federal regulators" behind the Wall Street financial crisis featured some dire words from three of the chief architects of the country's financial system.
Notably, former Federal Reserve chairman Alan Greenspan likened the crisis to a "once-in-a-century" tsunami and admitted to having a "flaw" in his financial ideology; Christopher Cox, chairman of the Securities and Exchange Commission, said aggressive law enforcement among investment firms and bankers was "needed now more than ever;" and John W. Snow, the former Treasury Department secretary, called the markets "deeply troubled," "fractured" and "frozen."
A collection of notable quotes from the House Oversight and Government Reform Committee hearing:
ALAN GREENSPAN, former chairman of the Federal Reserve
"We are in the midst of a once-in-a-century credit tsunami. Central banks and governments are being required to take unprecedented measures. You importantly represent those on whose behalf economic policy is made, those who are feeling the brunt of the crisis in their workplaces and homes."
"Well, partially." -- Greenspan's response to Waxman's question about whether the former Fed chairman was "wrong" in being such a "staunch advocate for letting markets regulate themselves."
"I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms."
See more quotes from Greenspan and others at the hearing after the jump
"So the problem here is something which looked to be a very solid edifice and, indeed, a critical pillar to market competition and free markets did break down. And I think that, as I said, shocked me. I still do not fully understand why it happened. And obviously to the extent that I figure out where it happened and why, I will change my views. And if the facts change, I will change."
"If all those extraordinarily capable people were unable to foresee the development of this critical problem, which undoubtedly was the cause of the world problem with respect to mortgage-backed securities, I have to -- I think we have to ask ourselves why is that.
And the answer is that we're not smart enough as people. We just cannot see events that far in advance. And unless we can, it's very difficult to look back and say, Why didn't we catch something. "
"What I'm saying to you is yes, I have found a flaw. I don't know how significant or permanent it is. But I have been very distressed by that fact...A flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak."
"The financial landscape that will greet the end of the crisis will be far different from the one that entered it little more than a year ago. Investors chastened will be exceptionally cautious."
"This crisis will pass, and America will reemerge with a far sounder financial system."
REP. HENRY A. WAXMAN (D-Calif.), chairman of the House Oversight and Government Reform Committee
"The list of regulatory mistakes and misjudgments is long, and the cost to taxpayers and our economy is staggering."
"For too long the prevailing attitude in Washington has been that the market always does best."
"Over and over again, ideology trumped governments. Our regulators became enablers rather than the enforcers. Their trust in the wisdom of the markets was infinite. The mantra became government regulation is wrong. The market is infallible."
CHRISTOPHER COX, chairman of the Securities and Exchange Commission
"Most importantly, we've learned that voluntary regulation of financial conglomerates does not work."
"Certainly, aggressive law enforcement is needed now more than ever. The SEC is a law enforcement agency dedicated to making sure that anyone who broke the securities laws is held accountable. And we are very, very busy on that right now."
"The crisis in banking, the credit crisis that we're living through, is a mortal danger to many of these institutions, and so determining the extent to which violations of the law may have contributed to this and holding anyone who violated the law accountable is of vital importance, and we are committing massive resources to it."
REP. ELIJAH E. CUMMINGS (D-Md.)
"My question is where have you been all these years?...Now, you became SEC chairman over three years ago. Why didn't you act sooner to require this disclosure of credit-default swaps?" -- Cummings to Cox, who responded "we would have like to have known what we know now, I think, years ago."
REP. MARK SOUDER (R-Ind.)
"They are legitimately angry that people seem to sit here, hearing after hearing, 'well, it wasn't my responsibility, and that you kind of knew it was happening, and whether it was Congress or here or there.' But they are furious." -- Souder, referring to American citizens "endangered" by the financial crisis.
"It's the culpability of the people who knew what they were buying, who were pretending to see no evil, hear no evil, report no evil, and the question is, even in an unregulated market, my belief is, is that many of them are criminal."
JOHN W. SNOW, former secretary of the U.S. Department of the Treasury
"We meet in an extraordinary time. Nowhere that I can recall during my adult lifetime has the financial system been so deeply troubled, so fractured, frozen."
"I regret I wasn't more effective in trying to persuade Congress of the need for action to deal with the risks that I saw as the largest and most visible systemic risk at the time."
"I think regulators need more transparency on the risks and the leverage in the financial system."
"Congressman, I actually think it's a much broader phenomenon, and in the risk of being maybe a little controversial here -- you know, we have had a policy in the United States to promote home ownership for a long time. That's a good thing...And I think the larger problem here, frankly, is that we've probably somewhat overdone that without reference to the consequences that that commitment to -- to housing has created for the country as a whole. I think we've got to rethink that balance."
By Derek Kravitz |
October 23, 2008; 4:01 PM ET
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