The Maestro
Wow. You don’t hear admissions like this every day:
“I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms,” Mr. Greenspan said.
Referring to his free-market ideology, Mr. Greenspan added: “I have found a flaw. I don’t know how significant or permanent it is. But I have been very distressed by that fact.”
Mr. Waxman pressed the former Fed chair to clarify his words. “In other words, you found that your view of the world, your ideology, was not right, it was not working,” Mr. Waxman said.
“Absolutely, precisely,” Mr. Greenspan replied. “You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.”
Greenspan is, of course, hardly unique in having been mistaken about some important public policy issues. He was, however, an unusually powerful official — arguably the second most important member of the government after the president — for an unusually long time. But beyond that, for a long time he managed to acquire an air of infallibility about him that was totally unique among political figures. He was treated as an oracle to be interpreted, not as an official to be scrutinized. It was, I think, a strange and unhealthy moment in the life of our country. At the end of the day, appointing people so brilliant that they’re never wrong about anything isn’t a real option in terms of thinking about ways to run the government.
80 Responses to “The Maestro”
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October 23rd, 2008 at 9:12 pm
Greenspan was an eccentric nut, just like William Renquist. It is very strange how the U.S. keeps putting weirdos like that into the positions of the greatest power.
October 23rd, 2008 at 9:14 pm
To give him some credit, he was pretty up front in this discussion that he’d been wrong; and not just wrong about some small detail but significantly wrong about his entire ideology, with implicit admission that it really screwed a lot of people. I won’t hold my breath to hear a similar admission out of, say, Cheney.
October 23rd, 2008 at 9:18 pm
And Ayn Rand does a lonely turn in her grave…
October 23rd, 2008 at 9:21 pm
“I have found a flaw. I don’t know how significant or permanent it is.”
He doesn’t know how permanent it is. Does he expect basic human nature to change in the foreseeable future?
October 23rd, 2008 at 9:22 pm
Greenspan was the right man to nurture the bubbles. Fulfilling the necessary historic role of new era demigod. For every every argument he made was based upon the premise that we were in a new age. An age technological advance coupled with the final full flowering of ‘free markets’. All bubbles require a new age.
If he hadn’t existed surely another would have taken the role. History called out for a fool and he just happened to be the right man at the right place at the right time.
October 23rd, 2008 at 9:24 pm
Oh, puleez! Was Enron so long ago that these fools forgot that corporate officers will f*ck their shareholders, employees, and customers if they have any reasonable chance of hiding a really big bunch of money offshore somewhere before getting caught?
October 23rd, 2008 at 9:26 pm
It probably reflects our times more than Greenspan’s character but — no, it reflects his character too — I’m just not used to public figures admitting error anymore. It make him seem…so much like a human being. I know the damage is already done but, nonetheless, thank you for that, Mr. Greenspan.
October 23rd, 2008 at 9:32 pm
I am so tired of liberals extending the benefit of the doubt to these right-wing creeps. They lie, and lie very well.
Greenspan wasn’t “wrong”, and we sure shouldn’t take his word for it. He is simply disarmingly covering his malice.
Neither was Rumfield “wrong”. Not was Brownie merely incompetent.
There was no incompetence.
October 23rd, 2008 at 9:33 pm
Wow. This news must have broken the heart of countless teenage Ayn Rand fans.
October 23rd, 2008 at 9:37 pm
Christ.
Alan Greenspan apologizes for being fricking naive and idealistic and Matt Yglesias buys it 100%.
It’s sickening.
October 23rd, 2008 at 9:39 pm
What about the middle-aged right-wingers who so often turn out to find their every thought justified by Ayn Rand?
October 23rd, 2008 at 9:39 pm
I wonder what his wife Andrea Mitchell thinks about all this.
He looked very old today. How much older is he than she is?
October 23rd, 2008 at 9:41 pm
Did he say if he is going to do something to atone for his sins?
October 23rd, 2008 at 9:56 pm
Riiiight! Please. Greenspan admits that he found a “flaw in his ideology?” He has only been alive, what 80+ years? And now he found the “flaw”? Please, the real apology we need is an admission that he ran everything on strictly ideological grounds with no admission for facts or history.
October 23rd, 2008 at 10:02 pm
I remember, sometime in the early 90s, a round table discussion on the News Hour, back when it was McNeil and Lehr, that had some political hacks along with Molly Ivins, and they got on the topic of Greenspan and the other guests went on about how what a genius Greenspan. Then Molly launched into a diatribe about how around her parts he wasn’t considered such a smart guy. She talked a bit about the S&L collapse and that by the time the Feds were there to do anything there was nothing but ruble. Also, about house serfs whose home values had depreciated past what they owed on them and now they couldn’t move and probably something about the junk bond raiders of the time. The rest of the table was slack jawed.
How I chuckled at her childlike innocence. What a rube! Well meaning, but really Molly, I thought, you’re way out of your league here. I was part of the new Democrats. Smaller, smarter government! Free trade! Unleash the power of the private sector!
Needless to say, my opinions have changed since then.
October 23rd, 2008 at 10:02 pm
James Madison noted that if men were angels, they would have no need of government. How did the idea prevail that the boardrooms of the nation’s great financial institutions were populated by angels? Deregulation…yeah.
October 23rd, 2008 at 10:13 pm
Has the NYT article linked by Matt been revised? I don’t see the passage quoted by Matt — although several other sites seem to have the same quote with the same link.
October 23rd, 2008 at 10:13 pm
So, Greenspan believed that a shadow market 3 times the size of the American economy could proceed in secret and unregulated, that buyers and sellers could make rational decisions without accurate information.
And he was head of the Federal Reserve. Great. Just great.
October 23rd, 2008 at 10:13 pm
What justlanded said. No acknowledgement of facts or history (including the Madisonian wisdom noted by Mr. Skaggs), just an adolescent reliance upon a simpleminded ideology.
I think we can count upon the media to report this widely so that the public will have a full opportunity to consider all the implications.
ha
October 23rd, 2008 at 10:13 pm
Thanks a lot, Allen! Nice of you to tell us this.
You’re going through a rough patch now, but hopefully things will get better for you. After eighteen years it must be rough to realize that you’ve screwed everything up.
Don’t worry about us, most of us will make it, more or less, one way or another.
October 23rd, 2008 at 10:15 pm
The man is eighty f*cking two years old and it took him that long to figure out that self-interest had a ugly side to it.
Pffffffffffffffffffffffffft
The man is not an idiot, he is not, by appearances, a loon, he is not a shut-in, nor developmentally disabled. Wow, we are supposed to buy maybe, a bad case of ideological myopia and being in a constant state of cognitive dissonance?
October 23rd, 2008 at 10:16 pm
If you want to see true deregulation in action, look towards China. They poison babies.
October 23rd, 2008 at 10:17 pm
We should all consider the possibility that this was all just Greenspan’s John Galt ratfuck.
Forty years ago he was a right wing madman, and there’s no solid evidence that he’s changed much. Maybe he’s just become more secretive.
October 23rd, 2008 at 10:21 pm
I wonder what his wife Andrea Mitchell thinks about all this.
Frankly, all along, haven’t we all been expecting a similar, “What the hell was I thinking when I married this guy?” statement from her?
October 23rd, 2008 at 10:21 pm
Neither was Rumfield “wrong”. Not was Brownie merely incompetent.
There was no incompetence.
Thank you, Bob.
Alan Greenspan came off government service with a record of
1. soaking wage-earners by having the SS trust fund buy debt created by income tax cuts for the wealthy.
2. Conducting monetary policy for twenty years to rave reviews from Wall Street
3. After it all goes to shit, giving Wall Street another trillion.
Now he’s contrite when it costs nothing.
October 23rd, 2008 at 10:33 pm
It was, I think, a strange and unhealthy moment in the life of our country.
“Moment”?
October 23rd, 2008 at 10:34 pm
It is much easier to sound like a genius when your worldview is determined by a fairly straightforward system of logic. At that point, one need only master it and then continue to push it toward its logical conclusion. In the land of the blind, the one-eyed man is king.
October 23rd, 2008 at 10:52 pm
If you believe that Greenspan made a “mistake” or was “shocked,” contact me – I have some ocean front property in Nebraska you’ll want to buy.
October 23rd, 2008 at 11:13 pm
Nice of Alan to tell us. The problem is that this country will never outgrow our cult of personality, looking for the guru and investing him with super-human wisdom. Greenspan not only pedaled that Randian crap, he personified its own excess.
As long as the media remain unwilling to tell the truth about how things really work, nothing will change.
October 24th, 2008 at 12:11 am
1) Alan should not be all that important. What’s important is that our damm Congresses failed to oversee and challenge Alan.
2) Since one of those Republican Congressmen on the Banking Committee was my own Jim Gerlach, I would think the Democratic National Committee would be flooding my district with flyers pointing how ole Jim screwed the pooch. But instead, I — and the other voters –hear NOTHING.
And Jim is skating to reelection –although he came close to losing in the three prior elections. I know — I spent months trying to defeat him.
3) So long as the Democratic Party is too damm SPINELESS to challenge these Republican assholes, I don’t see why the Republicans should be afraid of looting the Treasury of $Trillions.
But hey, maybe one of the Democratic Party’s billionaire Patrons asked the Party leadership to lay off ole Jim. I wonder why?
4) Anyone else notice how there has been no real criticism of the Republicans by the Democrats? What’s that –professional courtesy?
October 24th, 2008 at 12:11 am
This is really fascinating — he never realized the failure of his ideology before because his ideology looks only at the abstraction level of economic entities; on that timescale and granularity the system was working just fine (the little guys being on the order of cells to be discarded, and the Enrons being blacksheep blips).
I think he’s being genuine here; this really is the first time that Greenspan is actually seeing the flaws in his ideology manifest in *incontrovertible systemic failure*.
This will be interesting…
October 24th, 2008 at 12:11 am
“I can calculate the motions of the heavenly bodies but not the madness of people.” — Isaac Newton on the South Sea Bubble.
Really, Alan, a blowjob from Ayn Rand doesn’t change that.
October 24th, 2008 at 12:11 am
I’m not a fan of Rand – I’m more a Rothbardian – but I don’t think that she liked the Federal Reserve. So I have a feeling that she would be turning in her grave long before now in regards to Greenspan. And Greenspan’s loose-money policies are not exactly Randian.
October 24th, 2008 at 12:14 am
Why doesn’t Waxman turn to the Republicans on his Committee and ask them “Why did you let Alan do That?”.
I mean, there’s a shitload of campaign commercials here just begging to be filmed.
October 24th, 2008 at 12:18 am
I’m not sure what kind of blindness is needed to see that organizations are not always run by people who put the organization’s interest ahead of their own. It’s rather amazing, actually.
Next thing you know they’ll be telling us markets aren’t rational.
October 24th, 2008 at 12:21 am
I mean, there’s a shitload of campaign commercials here just begging to be filmed.
Every time I see Waxman on TV I don’t know who he is. I’ve got this picture in my head of him from what I read and when I see him in real life it doesn’t jibe. Maybe there are some radio ads to be me made, but nothing good can come from filming that guy.
October 24th, 2008 at 12:38 am
“Really, Alan, a blowjob from Ayn Rand doesn’t change that.”
I don’t know about that. Look what an ass-raping from Karl Marx did for you.
October 24th, 2008 at 12:40 am
Maybe this numbnuts might have reflected at some point in his delusional career that organizations don’t have “self-interests”: they are simply the battlegrounds on which individual interests compete.
October 24th, 2008 at 12:53 am
Ooh, stick you, “james”. Go and unstick your copy of The Fountainhead, there’s a good boy.
October 24th, 2008 at 1:24 am
I don’t know about that. Look what an ass-raping from Karl Marx did for you.
Like what?
Marx is looking a bit smart these days. Take some time off and read the literature, and tell me where Marx fucked up. *I* know where, but to make such a statement today, tells me you don’t.
Your silly, little, idol knows where minarchism just hit it’s obvious point of failure. It’s sad you don’t.
October 24th, 2008 at 1:27 am
People so brilliant that they’re never wrong about anything – people like ME – would be tearing down the government, not running it.
Glaivester is right about Greenspan and Rand. Rand was in favor of the Austrian school (for the most part; she had problems with subjective value theory – almost by definition, being an “Objectivist”) and Greenspan is not an Austrian school economist. He apparently started out as a follower of Keynes and subsequently converted to Austrian School during his time associating with Rand. Subsequently it seems clear he dropped all pretense of being Austrian and simply went his own way, making it up as he went along.
This whole bit about “gee, I thought rich guys were smarter than that” is more evidence of advanced senility than any real economic postulate. No free market theory I’m aware of assumes that corporate CEOs – who wouldn’t exist in a real free market anyway since corporations would not exist – have any particular insight. The assumption is that the actions of everybody in the market will deal with market irregularities – not that any one group of individuals would.
So his comment is just stupid.
October 24th, 2008 at 1:35 am
Take some time off and read the literature, and tell me where Marx fucked up.
Priceless.
How’s that five year plan for toilet paper going, comrade?
October 24th, 2008 at 1:46 am
Well, it is hard to be overawed by Marx’s version of the labor theory of value and the transformation problem, which just looks like basic confusion to me every time I come in contact with it. The historical stuff, on the other hand, is pretty suggestive at times.
October 24th, 2008 at 1:50 am
-Democrat President Bill Clinton, renominating Alan Greenspan for an additional term as Chairman of the Federal Reserve, January 2000.
October 24th, 2008 at 2:06 am
Bill Number: PN 729
Synopsis: Alan Greenspan for Chairman of Federal Reserve
Issue: Executive Branch
Date: 02/03/2000
Sponsor: President William J. Clinton
Democratic Senator vote count:
Yes: 28
No: 3
October 24th, 2008 at 2:22 am
Jason, that list of Democrats who voted for Greenspan includes Joe Biden, John Edwards and Teddy Kennedy. I’m sure Obama and Hillary would’ve voted for him too if they had been in the Senate at the time.
Who knew the Democrats are the party of Ayn Rand?
October 24th, 2008 at 2:30 am
Business Day interview with economist Paul Krugman, October 4 1996:
STUART VARNEY: Now, the economy is doing- on the surface, at least, particularly well at the moment. Very low unemployment rates, low inflation, relatively low interest rates, et cetera, et cetera. Do you think that Mr. Clinton can take much of the credit for that situation?
PAUL KRUGMAN: Very little of it. The deficit- budget deficit is, maybe, $40 billion lower than it would be, had he not passed that 1993 tax increase. The rest is all Alan Greenspan’s doing.
STUART VARNEY: Alan Greenspan is really running this economy and he’s responsible for its good performance?
PAUL KRUGMAN: Oh, yes. Alan Greenspan has done a masterful job uniquely well, compared with all other Central Bankers in the world.
October 24th, 2008 at 2:54 am
read bill fleckenstein’s recent book, Greenspan’s Bubbles, for all the details.
October 24th, 2008 at 6:06 am
The Patriot Act criminalizes
“significant adverse systemic impact on the international payment, clearance, and settlement system”
which neatly characterizes Greenspan’s role.
October 24th, 2008 at 7:00 am
See also Petraeus, David.
October 24th, 2008 at 7:28 am
Of course his ideology was wrong. All ideologies are wrong.
I’ll note that classic liberalism in not an ideology but rather an operational model whereby competing interests a given equal opportunity to effect decisions. The bubble blowers of course gained the upper hand because everyone loves something for nothing.
That Greenspan was wrong was apparent to many long ago. That they were denigrated and spurned is not surprising either. That an entire ideology was enlisted to defend and justify sillyness is par for the course.
Greenspan’s and The Street’s mantra for years was that risk was being taken on by those most able to bear it. Profoundly simple analysis showed that while for each transaction where risk was traded this was true, because of he sheer volume of such transaction systematic risk was soaring.
In each of the 5 cases where markets dislocated during Greenspan’s tenure his ability to inject liquidity into the markets saved the day. Thus emboldening ever more risk taking on the part of participants. Every crisis thus became an opprotunity. Till now.
October 24th, 2008 at 7:31 am
These financial and thus economic events are destined to be the single most important historic event in the lifetimes of the majority of Americans. Not that anyone cares or should but I’ve been saying the same thing here for18 months. Everything you know is wrong or perhaps just doesn’t apply any more.
As a political event the single most important question will be this. Will the authoritarians take control?
October 24th, 2008 at 7:37 am
Greenspan’s terms fortuitously coincided with an economic boom propelled by technology, low oil prices, and downward pressure on prices from expanding globalization. He acquired oracular status by merely going along for the ride.
October 24th, 2008 at 8:02 am
That’s an optimistic outlook. We thought that about September 11th, too.
October 24th, 2008 at 8:11 am
The problem with Greenspan’s so-called “apology” is that he is again misconstruing the lesson to be learned from all this. “Free markets” produce optimal results only under certain conditions, which are rarely met in the real world. And, very often, deviation from those conditions, is considerable, as with credit default swaps.
That means that “free markets” will regularly produce distortions that may be highly undesirable. While using the market as a mechanism is still to be preferred to “government planning,” it does not logically lead to a conclusion that we are better off with no regulation.
The real lesson here is that, to the extent that the assumptions or conditions of a competitive market — e.g., perfect information — are not met, we ought to expect outcomes that are suboptimal, not be surprised by them, as he claims to be.
October 24th, 2008 at 9:30 am
Greenspan’s worldview didn’t need them to be angels. A critical mass of competent devils would suffice. We didn’t even have that.
October 24th, 2008 at 10:24 am
rapier:
Of course his ideology was wrong. All ideologies are wrong.
I’ll note that classic liberalism in not an ideology but rather an operational model whereby competing interests a given equal opportunity to effect decisions. The bubble blowers of course gained the upper hand because everyone loves something for nothing.
I’d agree with Greenspan that everyone has an ideology, not even you are somehow outside it, looking in.
Your ideology is that classic liberalism works best.
The thing is that ideology’s can be effected by events in the real world.
October 24th, 2008 at 10:28 am
To give him some credit, he was pretty up front in this discussion that he’d been wrong; and not just wrong about some small detail but significantly wrong about his entire ideology, with implicit admission that it really screwed a lot of people. I won’t hold my breath to hear a similar admission out of, say, Cheney.
What proof would you give that Cheney was “wrong” and in what way was he “wrong.”
Greenspan was intellectually honest enough to see his ideas on regulation and markets – central ideas – proven wrong by events. Thanks Bill Clinton for reappointing him to the Fed Chair!
October 24th, 2008 at 10:49 am
Personally, I don’t care if Greenspan and the corporate officers admit they were wrong, although that’s nice, or say they are sorry for what they did, which doesn’t really matter. What I REALLY want is for the tens and hundreds of millions of dollars they received in bonuses (I know this doesn’t apply to Greenspan) to be disgorged.
October 24th, 2008 at 11:29 am
What is wrong with you people?
We finally have a conservative admit publicly that he’s actions were wrong and all you want to do is continue to harangue and castrate him.
There’s a difference between someone admitting guilt after they got caught trying to screw everyone and someone who made an honest mistake based on ideology that he thought he was implementing for the public good. While I think Greenspan should certainly be held responsible for some portion of our meltdown, we don’t need to crucify and ostracize the man. He has a wealth of knowledge that could be useful to right this ship. Who’s more valuable than someone who has learned from their own mistakes?
After all, isn’t that what mistakes are good for?
October 24th, 2008 at 11:43 am
There’s a difference between someone admitting guilt after they got caught trying to screw everyone and someone who made an honest mistake based on ideology that he thought he was implementing for the public good
I can’t believe in the sincerity of a transparently ridiculous intellectual position. That free markets require that both sides proceed with equal information has been a staple of economic thought for years. And yet here we had a market — credit swaps and other derivatives — that was unregulated and essentially hidden from its participants. Even after the meltdown, the people charged with saving various companies don’t know the extent of the holdings of the people they’re supposed to help. And the credit swap/derivatives market wasn’t incidental: it dwarfed the “real” market. Greenspan wasn’t stupid during all of this: he was craven and complicit. And vain. His “apology”, as per usual with him, isn’t even an apology. It’s the kind of self-absolving piece of crap one associates with a McCain “apology”.
October 24th, 2008 at 12:15 pm
I can’t believe in the sincerity of a transparently ridiculous intellectual position.
If Greenspan had a serial history of exploiting policy for his own good, then I’d agree with you. He clearly doesn’t.
There’s a difference between someone instituting public policy and those who abuse it to extremes. Are politicians guilty of all gun deaths just because there are some who will exploit the 2nd amendment for nefarious means? Is Greenspan TOTALLY responsible for irresponsible behavior by banks, investment firms, unqualified home owners?
All I’m saying is take a minute to realize the implications of being overbearing in our criticism of Greenspan. Yes, he was wrong. He’s admitted it. It’s a mark on his record. Do we really want to subject anybody who ever has made a mistake in judging the amount of moderation needed to overwhelming criticism? Is that helpful going forward?
Is George Bush now the standard for how to gloss over failure in public? While I am angry about the lack of oversight, I’m also encouraged that Greenspan had the integrity to admit error when he realized it.
October 24th, 2008 at 12:15 pm
Greenspan’s apology and acknowledgment of error is set at a bit too ethereal and passive a level — it’s not simply that he “misunderstood” the system, he trusted people who should not have been trusted, and trusted them with the well being of the nation’s economy.
October 24th, 2008 at 12:18 pm
Greenspan’s mistakes are too big. Words here won’t really hurt im anyway. He should be spoken of with the maximum amount of contempt so as to discourage the next generation from making his mistakes. Those mistakes in the end were ideological in origin. To wit a fundamental misunderstanding of the dynamics of human organization that is the root of Libertarian fallacies.
You had ‘individuals’, the gods of Ayn Rand’s cartoon universe, in charge of gigantic corporations who used the power of those organizations to fix the game in their favor. The power to decide where capital and credit would go and sure enough, it went into what they produced, financial paper. ‘Individualism’ had nothing to do with it. It was about gathering and using power. Raw power.
I’m not convinced that in fact Greenspan was ignorant of all this. It’s just as likely that he acted with the desire to help the financial elites and their political bretheren gain ever more wealth and power.
The game isn’t over yet. While the absolute wealth of the very wealthiest is taking a gigantic hit now their relative wealth could actually increase and in the end that’s what matters most to the strivers.
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