Greenspan Gets Pummeled by Congress

Posted by: Chris Palmeri on October 23, 2008

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Oh how the housing mess has brought down the both the little folks and the high and mighty.

Alan Greenspan got his comeuppance on the witness stand in front of the House Committee on Oversight and Government Reform today, finally admitting he had relied too much on the free market to police itself during the housing bubble.

Eighteen years as Fed chief, Greenspan will go down not as the “maestro” he was once called but as the guy who kept rates too low and encouraged all kinds of exotic mortgage and investment products.

This one detail from the Congressional hearings today, courtesy of Bloomberg News, says a lot.

“(Committee Chairman Henry) Waxman and other lawmakers repeatedly interrupted Greenspan as he answered their questions, in contrast to deference to his testimony while he was Fed chairman.”

Reader Comments

Fazal Majid

October 24, 2008 1:25 AM

I never understood all the deference given to Greenspan. It was Paul Volcker who did all the hard work taming inflation in the 80s, Greenspan merely coasted on that legacy.

Greenspan is a Randian. Murray Rothbard, a libertarian economist, penned a devastating exposé of Rand's cult:

http://www.lewrockwell.com/rothbard/rothbard23.html

chhoung

October 24, 2008 4:50 PM

He deserved. The rate was kept so low and for too long, and people used their homes like an AMT machines (multiple refinances). The housing markets were not busted if Mr. Chairman didn't fall asleep and we could have bought our first home today. He didn’t create new jobs, during his last tenure as a Fed Chairman; he manipulated the housing markets by keeping the rate low and flooded the markets with home equities.

Snoz

October 24, 2008 7:48 PM

The hunt for escape-goats has begun. No one, from Congressmen to laymen, from eastern Broadwalk to California's pacific piers, is willing to acknowledge the sins of its government. Why has a proud people of a proud Nation gone so astray in so much debt that they can't repay? When the American people determine that its green-back is worthless, there will be rampant greed and shameless wagering in oil speculation, real estate flipping, hedgefunds, derivatives, swap-default, MegaLotto, Powerballs, casinos, and horseracing. America's resort to games of chance and fantasy speculation for the quick-easy buck is a sign of despair that their faith for a better future is waning and that the US monetary system is about to go broke. What has unleashed such despair among the American people? With out restrain, the US Treasury has been printing green-back with abandon for the past 30 years. The result is that a millionaire today has the standard of living of a middleclass working stiff 30 years ago. Nobody knows what the green-back is really worth when the US currency severed its ties to gold in 1973. The exception is Charles DeGaul, PM of France, who understood the slight-of-hand of Uncle Sam and who in 1973 demanded gold payments for international trades. With out any accountability, US Treasury printed trillions of dollars which made everyone temporarily rich until the chicken-came-home-to-roost that the US economy suffers today. Accustomed to living high on borrowed easy money, America's solution to the current financial crisis is to print trillions of green-backs to pay for the trillions of unpaid IOUs. Does anyone see the analogy between the drug addict's need for more quick "fix" and Treasury's need to quickly "fix" the failing monetary system? The real solution is to hold both the drug addict and the Treasury accountable to a gold standard: No more creating artificial good-time feelings. Unfortunately, like most back-sliders, the American people no longer have the fortitude, courage, or moral conviction to do what is right because they have all become junkies of the easy money. The cold-turkey scenario is too much to bear for the American people: pain, convulsion, deprivation, and soul-searching. For the Junkies, the easy way out is to find and blame escape-goats, while planning the next quick "fix." Rome collapsed under lesser sins of its people.

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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