Alan Greenspan himself admitted that he was wrong 30% of the time. Tom Matzzie:
In testimony before the Financial Crisis Inquiry Commission former Federal Reserve Chairman Alan Greenspan defended his record during questions by Chairman Phil Angelides by saying he was "right 70 percent" and "wrong 30 percent" of the time.
When asked whether the financial crisis was one of the times he got it wrong he answered, "I don't know."
If there is a photo in the dictionary next to the word "clueless" it should look like Alan Greenspan.
These are outrageous statements by a financial regulator whose job was to protect the entire U.S. economy. The fact that the lead-up to the financial meltdown in 2008 happened under Greenspan's watch seems to have escaped his grasp.
Imagine if airline pilots only landed 70 percent of airplanes, crossing guards only protected 70 percent of students or if your bank only honored 70 percent of your checks. It would be a public scandal. There would be indictments; prosecutions and surely the perpetrators would face consequences. We need the same expectation of safety for our banks that we have for airplanes flying America's skies--that they won't crash.
Nobody is asking anybody to predict the future, but there were other economists who saw what was happening and who didn't have the job of protecting the public. It would seem that Greenspan had the wrong personality and outlook for the job of Federal Reserve Chairman. He acted more like "Wall Street's man in Washington" than "the most powerful person in banking."
What we really learned from his testimony is what many already know: Alan Greenspan was and still is ideologically opposed to oversight of Big Banks and Wall Street. He didn't take action to stem the financial crisis because he didn't believe in action. That is the worst quality in a financial regulator. We want our sheriffs to catch the bad guys just like we want financial regulators to keep the Big Banks in line.
The failures in Washington over the last ten years--like the failures at the Big Banks--had two things going on: bad laws and regulators who didn't believe they had a role to play. Both things need to change.
Financial reform is already underway in Congress and it is still undecided as to whether reform will truly rein in the most dangerous Wall Street practices that ultimately hurt the entire economy or whether it will paper over the need for reform.
But what has to happen even if Congress won't do it is a complete repudiation of the regulators who were asleep at the switch during the financial crisis. Only if future regulators know that public shame or worse is the cost of their failures will laws--even new ones--work effectively.
That is why the Commission needs to call or subpoena former Securities and Exchange Commission Chairman Christopher Cox. The public was promised testimony by Cox in January but he has yet to appear. Cox, like Greenspan, was ideologically opposed to a strong SEC to protect consumers. During his tenure leading up to the crisis Cox hobbled the SEC in a range of areas. Cox is now tied directly to the collapse of Lehman Brothers (here, here and here).
And, the new laws and rules should be written so they're bulletproof against even a shortsighted Federal Reserve chairman with a very thin briefcase or an SEC chairman with a campaign war chest full of Wall Street money.
When you and I make mistakes, the lawn doesn't get mowed. When Alan Greenspan makes mistakes the economy trembles.
There's a lot more mistakes the Commission needs to uncover. That's why they need to get tough. They hold more hearings, issue subpoenas and hold people like Alan Greenspan and Christopher Cox accountable.
Today, Accountable America's Tom Matzzie called for more hearings and called on the FCIC to subpoena former SEC head Christopher Cox. Matzzie:
It is good to see the Financial Crisis Inquiry Commission finally call more witnesses including whistleblowers and Alan Greenspan. It is clear that Greenspan’s blind faith in deregulated rules was a factor causing the entire financial crisis. Greenspan admitted today that as early as 1998 the Federal Reserve was aware of brewing problems—yet Greenspan failed to act repeatedly.
Former SEC Chair Christopher Cox was Greenspan’s twin in the lead up to the crisis. Future hearings should focus on Cox. Mounting evidence implicates Cox’ failures particularly around Lehman Brothers. Cox hobbled the SEC just like Greenspan kept the Federal Reserve from taking action. The SEC under Cox was supervising Lehman in 2007 and 2008 when things spun out of control. The Commission needs to get to the bottom of this. Subpoena Chris Cox if he won’t appear.
Financial Reform should take note of the failures of regulators like Cox and Greenspan and write unmerciful rules to protect consumers. We need a tough cop on the beat.
Today’s hearings are not enough. There must be more hearings, more transparency into the investigations, subpoenas and, yes, criminal referrals. It is time for the Commission to get serious and if certain commissioners are obstructing the work they should be held publicly accountable. No more games—only action.
It's time for the FCIC to hold more hearings, issue subpoenas, get to the bottom of what happened and hold people accountable.
Alan Greenspan is testifying now before the Financial Crisis Inquiry Commission (FCIC). Watch now.
Tomorrow, Chuck Prince and Robert Rubin from Citi testify and Robert J. Levin and Daniel H. Mudd formerly of Fannie Mae will testify on Friday.
It's clear from this and past hearings that the big banks need to be held accountable. The greedy and reckless behavior of big banks on Wall Street caused a financial crisis that cost Americans millions of lost jobs, billions in taxpayer funded bailouts and trillions in last retirement savings.
Financial reform is more urgent now than ever before. And, it's clear that the FCIC needs to hold more hearings, issue more subpoenas and find out even more about what happened. In particular, the failures of former regulators like Christopher Cox need to be exposed. Never again should the people writing and enforcing the rules be beholden to the big banks instead of the public.
Stay tuned today, tomorrow and Friday to the FCIC hearings on C-SPAN2.
The Securities & Exchange Commission is responsible for enforcing securities and financial regulatory law in this country. In the lead up to and during the beginning of the global financial crisis three men were asleep at the wheel: former SEC head Christopher Cox, former Fed Chair Alan Greenspan and current Fed Chair Ben Bernanke.
Accountable America Chairman Tom Matzzie said that these three men must answer for their actions:
It’s about time. Chairman Angelides is right to call Cox and Greenspan. If they decline to appear they should be subpoenaed.
Cox macheted the law enforcement functions of the SEC—one of the reasons Bernie Madoff was never caught.
Cox in particular allowed the banks to over-leverage themselves by neglecting his role as SEC chair to protect the public. An SEC bank supervision program, started in 2004 by his predecessor, was abominably managed by Cox and has been called one of the single greatest factors contributing to the financial crisis. Cox’s 17-year record and demeanor as chairman was always to protect the Wall Street banks rather than investors, the public and the economy at large.
It is easy to forget that Alan Greenspan ran the Fed for most of the period when the housing bubble was being inflated. He sat by as the bubble grew with few critical words until after he left his post.