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.