Whoops! My bad. Sorry.
In effect, this is what former Fed chair Alan Greenspan is telling members of the House Committee of Government Oversight and Reform today by admitting he was wrong about unfettered free markets regulating themselves.
“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,” Greenspan conceded in response to relentless questions by committee chair Henry Waxman.
“I found a flaw,” Greenspan shrugged. “I don’t know how significant or permanent it is. But I have been very distressed by that fact.”
Oh, gee, Alan, I’m so sorry you’re “distressed.”
Who’s Really Distressed?
But I wonder if you are as distressed as the millions who lost their homes, or as distressed as the growing ranks of unemployed – which swelled by an unexpectedly high 15,000 more people last week, or as distressed as the tens of millions who’ve seen the value of their retirement accounts slashed by half in less than six weeks, or as distressed as the large and small businesses unable to borrow money to finance on-going operations – all crashing down because of your blind adherence to the ability of banks, the equity and debt markets and the free wheeling new instruments to regulate themselves.
You’re distressed? Mr. Greenspan, you should be apoplectic. And apologetic.
Waxman pressed Greenspan to explain, asking, “In other words, you found that your view of the world, your ideology, was not right, it was not working.”
“Absolutely, precisely,” he conceded.
Greenspan says he is in “a state of shocked disbelief” about the breakdown in the ability of banks to regulate themselves, as if consumer groups, Barack Obama and members of Congress haven’t been warning of precisely this problem for two years.
The former Fed chair went on to warn about the economic consequences of the crisis, saying that he “cannot see how we will avoid a significant rise in layoffs and unemployment.”
Gee, you think? Initial claims for state unemployment insurance benefits increased last week to a seasonally adjusted 478,000, up from 463,000 the previous week, the Labor Dept. reports on the same day Greenspan is ostentatiously overstating the obvious before Congress.
Bye Bye Reaganomics
It’s a tough week for Republicans, beyond the increasingly bad poll numbers for the McCain-Palin ticket and down ballot Republican candidates across the country.
First, Colin Powell shattered John McCain’s claim to being a more capable president then Obama. Then, Hockey Mom Sarah gets caught with her skirt down in a Neiman Marcus dressing room while holding a $150,000 check from the Republican National Committee to buy fancy new duds. And not even the RNC could stomach Rep. Michelle Bachman’s call for a witch hunt against anti-American members of Congress and cut off its financial support for her re-election.
Finally, Greenspan knee-caps the McCain campaign’s call for even less market regulation. Beyond this – and perhaps more importantly – he did us all a favor by pounding the last nail in the coffin of Reaganomics. That’s the silly notion that if you make the rich richer by leaving them alone and unregulated, the poor and middle class will somehow be able to scramble for leftover bacon drippings and thus fare better in the world.
Reaganomics never made sense, never worked and, as an idea, should have been aborted before the idea was born as tax and regulatory legislation. The so-called “Laffer Curve” and Chicago school of economics on which Reagan’s policies were based has come a cropper along with the global economy and financial system.
Meanwhile, the rest of us are left with Mac-and-Cheeze dinners, food bank handouts and unemployment checks. As usual, it is the middle class and poor paying the price for the “flaw” Greenspan discovers too late to do any good.
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