Alan Greenspan goes to Washington. And this time he sounds more like Jimmy Stewart as the naive Boy Scout leader who is appointed to the Senate in the movie “Mr. Smith Goes to Washington.” The Jimmy Stewart character is a Boy Scout, full of innocence, always hopeful, and believing in the honesty of others. He is shocked to learn that the senior Senator from is State is corrupt. Sounds similar to Mr Greenspan.
“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.
Congressmen, eager to distance themselves from the economic debacle, grilled Greenspan as if he had not left his position with the Federal Reserve three years ago. Greenspan is admirably showing up and taking the heat. He admits wrong calculations – and this writer believes him – there is nothing corrupt about Alan Greenspan.
The accusation against Greenspan is that he kept interest rates too low for too long – thus encouraging borrowing beyond means. That is likely an honest miscalculation. It seems there may be more variables with economics than Greenspan or anyone else can compute in a single formula.
The other accusation is less innocent – and much more troubling. Greenspan did not stop, or slow down, or rein in, the rapid growth of risky and sometimes fraudulent mortgage bundles. In short – he had the power to prevent some of the financial practices that have led directly to the current economic bust.
Alan Greenspan is no Boy Scout. He was the Chairman of the Federal Reserve for eighteen years. Under questioning Greenspan admitted that his view of the economic world was not right. Greenspan was one of the central champions of deregulation. He advised George H. W. Bush, Bill Clinton, and George W. Bush. His expertise was so valued and respected that virtually no one in Congress challenged him.
Greenspan admits his error in judgment. This writer believes him. The fault with Greenspan was not criminal – merely naive. Greenspan deeply underestimated the power of greed. My guess is that Greenspan refused to believe that any of the Banking CEO’s would take the sort of risks that many of them took. Naive.
This troubles me. Even redneck country bumpkins like me have heard the phrase, “Power Corrupts, Absolute Power Corrupts Absolutely.” Billy Bob always said, “Trust God, but lock your car.”
There are 435 Congressmen, 100 Senators, one President, and a Federal bureaucracy of a bazillion folks who study this stuff. Did they think that the Banking CEO’s could not be corrupted? That is what Greenspan said before Congress today. In case you missed it the first time: “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.”
Those of us who have lost small fortunes, who have lost our homes, who have lost our jobs, who have postponed retirement, who fear for the future of our children are in a state of shock and disbelief.
Actual Quote from John Acton: “Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men.“