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KAI RYSSDAL:This was Alan Greenspan day at the Brookings Institution. The former Fed Chairman presented a 48-page defense of his tenure running the central bank.
As our senior business correspondent Bob Moon reports.
Bob Moon: Greenspan’s critics say he’s conveniently forgetting the past. He says now that regulators did too little to halt the rise of those “too big to fail” banks. But just five years ago, he was selling the country on his hands-off approach.
Alan Greenspan on Dec. 2, 2005: The impressive performance of the U.S. economy over the past couple of decades, despite shocks that in the past would have surely produced marked economic disruption, offers clear evidence of the benefits of increased market flexibility.
The Cato Institute’s Gerald O’Driscoll says it was Greenspan who led the charge for deregulation — and worse, he says, for that hands off approach:
Gerald O’Driscoll: The Fed had statutory authority over the whole array of people making mortgages since 1994, and there was just non-enforcement of basic banking law.
Greenspan also argues it wasn’t short-term interest rates that fueled the housing bubble, but long-term rates the Fed has little control over. Not so, says Frederick Sheehan, who wrote a book on Greenspan titled “Panderer to Power.” Sheehan says Greenspan actually made a speech early this decade promoting short-term adjustable-rate mortgages, which grew from 2 percent to 67 percent of the California market.
Frederick Sheehan: So the carnage today is directly from the short-term interest rate policies of the Federal Reserve.
The author of another book critical of Greenspan says the former Fed boss is not one to admit mistakes. William Fleckenstein co-wrote the book “Greenspan’s Bubbles.”
William Fleckenstein: He’s just trying to avoid any blame. It’s just so obvious. And the fact that people let him get up and say this kind of nonsense and don’t boo him off the stage is mind-boggling to me.
For his part, Greenspan says the good times lulled regulators into a sense of complacency.
I’m Bob Moon for Marketplace.
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