Market Talk

Please tell me this isn’t really happening:

It is very evident to me that the underlying crisis was caused by what is clearly a once-in-a- century event.

I don’t mean, please tell me a once-in-a-century event isn’t happening; I mean, please tell me Alan Greenspan isn’t telling me the financial meltdown was caused by a once-in-a-century event. Because I’ve about had it with this nonsense. Look, it’s bad enough when some sell-side analyst peddles this nonsense, or some party hack with banking-lobby money behind them. But to hear it from “The Maestro,” well, it’s just galling (by the way, that is the last time I will use that nickname to refer to him; “The Maestro”? Are you kidding me? More like “The Sorcerer’s Apprentice.”) Because he is far too smart to actually believe that nonsense.

I’m not sure how many more times this will need to be said: everything about this crisis was 100% man-made. There’s no “perfect storm” nothing about it. If you want to point out that the financial meltdown was the result of a big, complex series of individual and institutional choices over a series of years that led to it, fine. That is true. But every single of them was made by a thinking, sentient being. Therefore, the entire fiasco was preventable. If only somebody in a position of authority, somebody in a position to make a difference, was paying attention.

Greenspan has it absolutely backwards. The once-in-a-century event was caused by the “underlying crisis,” not the other way around, and the crisis was caused by a series of decisions made people. Greedy people, mainly, but people all the same. Mississippi floods, Atlantic hurricanes, California earthquakes are acts of God. Financial crises are acts of greed.

This isn’t just a matter of Greenspan’s legacy, although I suspect that’s all he really cares about, seeing as he goes on so about how it wasn’t the Fed’s fault. No, we need to understand what went wrong, and why it went wrong, so we can draw up the right equation for setting things back in place.

Of course, the Sorcerer’s Apprentice knows all this, too. What this is really about is his continued efforts to direct the aim away from himself, and his Fed, and his disastrous decision in 2002 to lower the fed funds rate to 1%. That was the big one, but of course, he ran the Fed for 20 years, so let’s not kid ourselves. Greenspan, and his “philosophy” were dead wrong, and he knows it:

REP. HENRY WAXMAN: In other words, you found that your view of the world, your ideology, was not right, it was not working?

ALAN GREENSPAN: That is — precisely. No, that’s precisely the reason I was shocked, because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.