Testifying before the Senate Banking Committee today, Allen Greenspan, the former Chairman of the Federal Reserve for 18 ½ years admitted that he was “partially” responsible for the current economic problems facing the nation. He admitted that mistakes were made in not regulating the mortgage market, and in his support and belief that the free market economy would regulate itself. Now, he admits that more regulation is needed, but hindsight is always 20/20. The real conundrum comes when Greenspan, the U.S.’s economic czar during that timespan when the mortgage bubble was growing, did not address this potential problem or even sound an alarm. Economists not privy to the wealth of information that Greenspan had coming across his desk, could see this coming.
The blame can be shared with our elected officials both in the executive and legislative branches. Greenspan, viewed an an intellectual celebrity, and his policies were seldom questioned by the same elected officials that are suppose to provide perspective and oversight. His reputation and his longevity as Federal Reserve Chairman obviously played a part in this serious lack of review. What has ensued is more like his reference to a “…credit tsunami..” than a “…flaw in the model…” Too interested in controlling inflation from the Reagan years, he resisted attempts at regulation of the banking institutions and their investments. He lost sight of the proverbial forest, by concentrating on the inflation tree. One must point out that Greenspan had a sense of good timing, he left before the “tsunami” hit.
But As For Me…
This debacle is an indication of the self-satisfied government officials who did not exercise their power to investigate or review, but accepted without question the statements of their economic guru. Further, this points out the power of federal appointees and employees that stay in power term after presidential term, and like J. Edgar Hoover possess enough knowledge to prevent oversight by those same officials, or removal by either political party. Like term limits for elected officials, maybe it’s time to think of term limits for appointees.
