The title is a line from my favorite movie, Almost Famous.
Greenspan denies blame for crisis, admits ‘flaw’
WASHINGTON Badgered by lawmakers, former Federal Reserve Chairman Alan Greenspan denied the nation’s economic crisis was his fault on Thursday but conceded the meltdown had revealed a flaw in a lifetime of economic thinking and left him in a “state of shocked disbelief.” Deny deny deny. Doesn’t change the truth. And why the fuck did it take so long for this to land on people’s radar?
Greenspan, who stepped down in 2006, called the banking and housing chaos a “once-in-a-century credit tsunami” that led to a breakdown in how the free market system functions. And he warned that things would get worse before they get better, with rising unemployment and no stabilization in housing prices for “many months.” No no buddy. This isn’t a once in a century tsunami. YOU are the once in a century tsunami. And your century is almost over. Please die.
Gloomy economic reports backed him up. New jobless claims soared to just under 500,000 for last week, and Goldman Sachs, Chrysler and Xerox all said they were cutting thousands more workers. On Wall Street, the Dow Jones industrials bounced erratically all day before finishing up 172 points after a two-day drop of nearly 750.
The financial crisis even prompted the Republican Greenspan, a staunch believer in free markets, to propose that government consider tougher regulations, including requiring financial firms that package mortgages into securities to keep a portion as a check on quality. If he was a staunch believer in free markets, hmm, why all the interest rate cuts? Why not let those “free markets” be free?
He said other regulatory changes should be considered, too, in such areas as fraud. Oh good. Let’s blame this on the banks. Yes, you had nothing to do with it.
Also looking for solutions, another banking regulator told Congress the government was working on a loan-guarantee plan that could help many homeowners escape foreclosure as part of the $700 billion bailout legislation. That plan is being discussed by the Treasury Department and the Federal Deposit Insurance Corp., said FDIC Chairman Sheila Bair, who is pushing the idea.
Greenspan’s interrogation by the House Oversight Committee was a far cry from his 18 1/2 years as Fed chairman, when he presided over the longest economic boom in the country’s history. He was viewed as a free-market icon on Wall Street and held in respect bordering on awe by most members of Congress. Well, most of Congress is fucking stupid then. Because if none of those bastards could see that by making the dollar cheaper and cheaper and cheaper that the free market was going to respond, in kind, by bringing the idea of get-rich-quick to predators, then all of Congress should be shot.
Not now. At an often contentious four-hour hearing, Greenspan, former Treasury Secretary John Snow and Securities and Exchange Commission Chairman Christopher Cox were repeatedly accused by Democrats on the committee of pursuing an anti-regulation agenda that set the stage for the biggest financial crisis in 70 years. It’s a little late Demmies. Maybe when all those people pulling down $30K a year were getting half million dollar houses, maybe you should have said something other than “Everyone deserves the American dream.” No. They don’t. Not if they can’t afford it.
“The list of regulatory mistakes and misjudgments is long,” panel chairman Henry Waxman declared.
Greenspan, 82, acknowledged under questioning that he had made a “mistake” in believing that banks, operating in their own self-interest, would do what was necessary to protect their shareholders and institutions. Greenspan called that “a flaw in the model … that defines how the world works.” No no no no no. All sarcasm aside, this is wrong. When you have the power to make a decision that has several hundred levels of execution of which you have no control over, you have a MORAL OBLIGATION to not set it into motion until you do your due diligence. Everyone knew the banks were really stretching it to give anyone and everyone a fucking loan. We all knew it when our newspaper delivery boy was buying a five bedroom house in Leesburg. Okay? EVERYONE KNEW. And it’s not EVERYONE’S job to protect the economy from destruction. It’s the people’s job who are in the decision making positions.
He acknowledged that he had also been wrong in rejecting fears that the five-year housing boom was turning into an unsustainable speculative bubble that could harm the economy when it burst. Greenspan maintained during that period that home prices were unlikely to post a significant decline nationally because housing was a local market. Well, housing WAS a local market. But banks are a national market. Seems like a contradiction to me.
He said Thursday that he held to that belief because until the current housing slump there had never been such a significant decline in prices nationwide. He said the current financial crisis had “turned out to be much broader than anything that I could have imagined.” Right, and this makes you an idiot. But more important than that, it makes everyone who hung on your every word an idiot as well. Because the world followed your every move like little lemmings, waiting for you to pronounce the word of God. And everyone was hanging on the financial equivalent of smoke in mirrors.
Greenspan’s much-anticipated appearance before the House panel came as the Senate Banking Committee held its own hearing on what the government is doing now to get out of the mess.
Assistant Treasury Secretary Neel Kashkari, who is overseeing the $700 billion financial rescue effort that passed Congress on Oct. 3, said the administration was not only working to get federal purchases of bank stock started quickly but also the program to mop up troubled mortgage-related assets. He also said the government was working to make sure that directives in the legislation to help struggling homeowners avoid foreclosure were being addressed.
Kashkari said the plan could include setting standards that banks should follow for reworking mortgages to make them more affordable. He said the administration was considering a recommendation to provide government loan guarantees to cover the reworked mortgages to make the program more attractive to banks. This isn’t fair, this isn’t fair and again, this isn’t fair.
“We are passionate about doing everything we can to avoid preventable foreclosures,” Kashkari told the committee. Stop fucking with the market people. Let them get foreclosed on. Let them file bankruptcy. And let the rest of us who saved our money scoop up houses at rock bottom prices so in 10 years, we can sell them for a windfall. There’s your free market economy boys.
The FDIC’s Bair told the same Senate panel that the government needs to do more to help tens of thousands of people avoid foreclosure.
She said the FDIC was working “closely and creatively” with the Treasury Department to come up with a plan.
Greenspan was asked to defend a variety of actions he took as Federal Reserve chairman resisting recommendations to use the Fed’s powers to crack down on subprime mortgages, for one. And opposing efforts to impose regulations on derivatives, the complex financial instruments that include credit default swaps, which have also figured prominently in the current crisis.
He said that outside of credit default swaps, the bulk of financial derivatives had not caused major problems. He said the boom in subprime lending occurred because of the huge demand for investment opportunities in a global economy, and he blamed the crash on a failure by investors to properly assess the risks from such mortgages, which went to borrowers with weak credit. The bulk of financial derivatives has not caused major problems? Have you ever heard of a domino effect?
As for firms that package mortgages into securities, he said, “As much as I would prefer it otherwise, in this financial environment I see no choice but to require that all securitizers retain a meaningful part of the securities they issue.”
On the billions of dollars of losses suffered by financial institutions because of their investments in subprime mortgages, Greenspan said he had been shocked by the failure of banking officials to protect their shareholders from their bad loan decisions.
“A critical pillar to market competition and free markets did break down,” Greenspan said. “I still do not fully understand why it happened.” The only reason all of this is happening is because people are greedy. And you can’t change the greedy, me me me feeling we have in the U.S. Everyone thinks they DESERVE a big house and nice cars and flat panel TV’s. If people did things like our grandparents, saved up before buying, this world would be much different than the one we have which lives on credit.
SEC Chairman Cox told the House panel that “somewhere in this terrible mess, laws were broken.” And Snow said that lawmakers should have responded more quickly to his pleas for stronger regulation for mortgage giants Fannie Mae and Freddie Mac, which were taken over by the government last month.
In the meantime, Kashkari, the Treasury official overseeing the bailout program, said there has been much progress, resulting in “numerous signs of improvement in our markets and in the confidence in our financial institutions.” Still, he cautioned, “the markets remain fragile.” Ya think? Gas prices are dropping several times in one day at local gas stations.