Greenspan’s Capital Idea

Yves Smith: Greenspan Says Banks Need More Capital, by Yves Smith: You have to give former Fed chairman Alan Greenspan credit for having no shame. Well, he did once look a bit rattled before Congress for about five minutes and ‘fessed up it never occurred to him that people would be so greedy as to run companies so as to leave burned hulks in their wake.Did he utterly miss reading the news during Enron and the 2002 accounting scandals?

Greenspan also made life difficult for Bernanke in early 2007 more than once. Indeed, prior to Greenspan, no former Fed chairman made frequent pronouncements. This is unseemly, but having a sense of propriety went out of fashion in America some time ago.

Now Greenspan is saying the banks are not OK (if they need a lot more capital, then by definition, they are undercapitalized now) when the powers that be have a full court press on to present precisely that image. And whose responsibility might it be that the banks are in such sorry shape? Might the Greenspan Fed’s extreme laissez faire stance have had a wee bit to do with it? …

This also goes along with his self-exonerating claim that the housing bubble was not caused by Fed policy under his watch, and that the problems could have been avoided if financial firms had larger capital buffers (and, according to Greenspan, all that is needed in terms of regulation is larger reserves against losses, no other regulation is needed, his often noted surprise at the failure of deregulated markets is that firms did not accumulate sufficient reserves on their own).

Originally published at Economist’s View and reproduced here with the author’s permission.

2 Responses to "Greenspan’s Capital Idea"

  1. Guest   June 1, 2009 at 3:23 pm

    I am sorry, I do apologize for my opinion, I dont mean to offend anyone.But, Greenspan is an ancient old dinosaur, does he even have an email address?The point is his experience of business is based on what 1950’s mentality? Where the bad guys are no-namer sales men with brief cases going door to door. With credit tabs and extension lists, its a completely different world.For example, Airline CEO’s now their is a bunch of C average students.Does anyone really listen to Greenspan anymore, or do they just say “ok, sure grandpa”?Senile old goat, still protecting missing the point approach.(And this post will definitely be anonymous, respectfully.)

  2. Anonymous   June 3, 2009 at 12:49 am

    Ya ,Greespan was a doddering buffon whose brains got fried reading Ayn Rand and juvenile stuff like that in his youth. He spent the rest of his life imagining his guru’s ideology had a formula for everything from macroeconomics to forex trading. Ironically, Ayn Rand had nicknamed him Undertaker. He almost did it for American capitalism. In that at least Rand was a prophetic.