Mr Greenspan, arguably the most powerful man in America for a decade or so, regretfully admits he made a mistake.
"… on Thursday, almost three years after stepping down as chairman of the Federal Reserve, a humbled Mr. Greenspan admitted that he had put too much faith in the self-correcting power of free markets and had failed to anticipate the self-destructive power of wanton mortgage lending.“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".
(Today, New York Times)
He's shocked, shocked to find out gambling is going on here.
I'm going to quote myself:
"Deregulate! they said. The market will correct itself and the economy will be strong. They said that a free market, unfettered by government rules and regulations is the best way to promote prosperity and financial health for all Americans.
Those people are idiots".
(Blog post of September 14—"We don't need no stinkin' economy")
Sure you can trust Institutions to look after their own self-interest. I'd say that's just what they were doing. Stuffing the vaults.
Actually speaking like that is wrong. There is a language problem here. One that Greenspan fell victim to. It's in speaking of "institutions" as if they were unitary beings, creatures complete in themselves. And forgetting that institutions are actually made up of fallible, often greedy and easily misled human beings.
"This institution will look after it's own self-interest and make responsible loans, it will protect the shareholders who trust it." That's talking like a bank or other lending institution is equivalent to a father looking after his family.
But what if Dad had limbs with brains and desires of their own? The left hand would be putting some food on the table while the right hand was raiding the freezer for steaks to sell at a profit, excusing it's actions with the idea that with the money it could buy more steaks at a cheaper market. After taking it's commission of course.
An institution isn't a thing. It's people.
And not all of those people are smart or honest or impervious to temptation.That's why we NEED REGULATION!
Where was I going? Oh yeah, we should try to change our vocabulary to reflect the fact that institutions are not monolithic beings but a collection of beings, not all of whom are working for the same goals, not all of whom are competent or honest or smart.
Sort of like Congress.
Tha's all for now.
Good night all of you.
(I think I'm up to three regulars now)