"...anyone who’s paid attention to the economy the past few years knows how ridiculous it is to fete Greenspan, the main architect of the policies that led to the Great Recession. If we lived in a just world, we would put him on trial, not on television. And his penalty should be to scrounge up the funds to pay JPMorgan Chase’s $13 billion fine with the Justice Department."
"After all, that fine penalizes JPMorgan Chase for duping investors into purchasing mortgage-backed securities it knew were stuffed with garbage loans. And nobody in America duped more people—investors, homeowners, you name it—into buying bad loans than Alan Greenspan. While chairing the Fed, Greenspan was in a perfect position to inform Americans about the unsustainability of the housing bubble and the overall threats to the financial system. But his allergy to regulation and unshakeable belief in the virtues of the free market led him to ignore the bubble and its risks, infusing investors and consumers with confidence that the run-up in home prices was perfectly normal. If misleading the public about the safety and soundness of the housing market is a crime, Greenspan is guilty. And he deserves some manner of punishment for that, not a week full of deference and respect."
"...Greenspan willfully ignored the forces operating under his nose. He knew that brokers were selling not only ARMs, but no-documentation “liar’s loans” and other dodgy products to unsuspecting subprime borrowers. Fed Governor Edward Gramlich gave a speech on the challenges of subprime just three months after Greenspan encouraged everyone to go into adjustable-rate loans. By September of that year, the FBI warned of a mortgage fraud “epidemic,” particularly from this new breed of suspect mortgage brokers. Advisors warned him on multiple occasions to do something about the growing problem, to guard against overall risk and protect consumers from harm.
But instead of tamping down the irrational exuberance in the housing markets, Greenspan encouraged homeowners to seek out precisely the types of products being fraudulently peddled by unscrupulous brokers. This fed the securitization machine and inflated the bubble. At the time, the Federal Reserve had consumer protection responsibilities for mortgages, but Greenspan did absolutely nothing to stop the rotten lending that would eventually implode the housing market. In addition, Greenspan lauded securitization in testimony before the Senate Banking Committee in 2005, saying it “does not create substantial systemic risks.” Only after he left the Fed, in 2008, did Greenspan decide that securitization was the culprit for the crisis. Greenspan pursued no regulatory avenues to deflate the bubble, nor did he bother to speak publicly about the dangers. Like a good Ayn Rand acolyte, Greenspan simply believed that lending institutions would act in their self-interest and never engage in destructive behavior. “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,” Greenspan admitted to a House panel in 2008. That mea culpa was short-lived; he returns in his new book to an antipathy for regulation and a belief in the righteousness of the free market."
No comments:
Post a Comment