AKA
Greenspan's Faux Pas
Greenspan's Regret
Greenspan's Mistake
You see people, The Maestro was wrong about Markets -- especially Corporate Wall Street-type Markets -- that they would be "self-correcting" ...
Greenspan Concedes Error on Regulation
by Edmund L. Anderews, nytimes.com -- October 23, 2008
[...]
“This modern risk-management paradigm held sway for decades,” he said. “The whole intellectual edifice, however, collapsed in the summer of last year.”
[...]
“Were you wrong?” Mr. Waxman asked.
“Partially,” the former Fed chairman reluctantly answered, before trying to parse his concession as thinly as possible.
[...]
Sometimes Markets
'implode' instead of correct.
Oops! Their "bad."
link
Greenspan -- I was wrong about the economy. Sort of
by Andrew Clark and Jill Treanor, theguardian.com -- Oct 23, 2008
[...]
"I made a mistake in presuming that the self-interests of organisations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms," said Greenspan.
[...]
He suggested his trust in the responsibility of banks had been misplaced: "Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity (myself especially) are in a state of shocked disbelief."
The congressional committee's Democratic chairman, Henry Waxman, pressed him: "You found that your view of the world, your ideology, was not right, it was not working?" Greenspan agreed: "That's precisely the reason I was shocked because I'd been going for 40 years or so with considerable evidence that it was working exceptionally well."
[...]
Greenspan Says I Still Don't Fully Understand What Happened {Reassuring, eh?}
"The problem here is something that looked to be a very solid edifice, and indeed a critical pillar to market competition and free markets, did break down. ... That as I say shocked me, and I still don't fully understand what happened."
link
Too bad so few got that rather shocking "Whoopsie" message (concerning Risk-shifting derivatives) ... and then learned from that ACME-sponsored History.
The rollback of Dodd-Frank is one of the current Congress' top priorities.
Have they learned nothing in the last decade ... of running those hot desert roads ...
Here is one group, who made a few serious points on the unmitigated damage, unregulated and non-correcting Markets can cause:
Financial Crisis Inquiry Commission -- January 2011 -- Summary Report (pdf)
Link to the official FCIC site, with a lot more Inquiry details.
As this report goes to print, there are more than 26 million Americans who are out of work, cannot find full-time work, or have given up looking for work. About four million families have lost their homes to foreclosure and another four and a half million have slipped into the foreclosure process or are seriously behind on their mortgage payments. Nearly $11 trillion in household wealth has vanished, with retirement accounts and life savings swept away.
Businesses, large and small, have felt the sting of a deep recession. There is much anger about what has transpired, and justifiably so. Many people who abided by all the rules now find themselves out of work and uncertain about their future prospects. The collateral damage of this crisis has been real people and real communities. The impacts of this crisis are likely to be felt for a generation. And the nation faces no easy path to renewed economic strength. [...]
* We conclude this financial crisis was avoidable.
The crisis was the result of human action and inaction, not of Mother Nature or computer models gone haywire. The captains of finance and the public stewards of our financial system ignored warnings and failed to question, understand, and manage evolving risks within a system essential to the well-being of the American public.
[...]
Yet there was pervasive permissiveness; little meaningful action was taken to quell the threats in a timely manner.
The prime example is the Federal Reserve’s pivotal failure to stem the flow of toxic mortgages, which it could have done by setting prudent mortgage-lending standards. The Federal Reserve was the one entity empowered to do so and it did not. The record of our examination is replete with evidence of other failures:
-- financial institutions made, bought, and sold mortgage securities they never examined, did not care to examine, or knew to be defective;
-- firms depended on tens of billions of dollars of borrowing that had to be renewed each and every night, secured by subprime mortgage securities;
-- and major firms and investors blindly relied on credit rating agencies as their arbiters of risk.
What else could one expect on a highway where there were neither speed limits nor neatly painted lines?
Aaah, which one of those lines, do you suspect would have the greatest impact -- when It goes Boom!
Speaking of things that go Boom! ... without a lot of 'self correcting' ...
Goldman's secret moral pathology
15 symptoms of a Wall Street disease destroying democracy and capitalism
by Paul B. Farrell, MarketWatch - Nov 24, 2009
MarketWatch -- In "The Battle for the Soul of Capitalism" Jack Bogle no longer sees Adam Smith's "invisible hand" driving "capitalism in a healthy, positive direction."
Today, his "Happy Conspiracy" of Wall Street plus co-conspirators in Washington and Corporate America are spreading a contagious "pathological mutation of capitalism" driven by the new "invisible hands" of this new "mutant capitalism"
[...] Wall Street's secret contagious pathology, with insiders like Lloyd Blankfein, Henry Paulson and others pocketing billions more of the firm's profits than shareholders, evidence the new "mutant capitalism" has replaced Adam Smith's 1776 version which historically endowed the soul of American democracy as well as our capitalistic system.
[...]
Today we'll paraphrase news reports about 15 symptoms spreading "soul sickness" beyond the boundaries of this Goldman case study: These are the 15 signs of a moral pathology undermining not just banking but American democracy and capitalism.
1. Gross denial of any moral damage caused by their rampant greed
2. Narcissistic egomaniacs with secret 'God complexes'
3. Paranoid obsessives about secrecy, guilt and non-disclosure
4. Power-hungry need to control government using Trojan Horses
5. Borderline personalities who regularly ignore conflicts of interest
6. Pathological liars incapable of honesty even with own investors
7. Sole fiduciary duty to insiders, not investors, never the public
8. Moral issues are PR glitches, violations of 'don't get caught' rule
9. Charitable donations are tax and PR opportunities, not moral issues
10. When exposed in a massive fraud, feign humility, fake an apology
...
Those are the guys, Greenspan was trusting, that
their Greed would make them do the Right Thing.
Whoops! Sorry about that folks. Think of Foreclosure, as just the "next chapter" in your lives.
Congressman Henry Waxman "My question is simple. Were you wrong?"
Greenspan "Partially ... I made a mistake in presuming that the self-interest of organisations, specifically banks, is such that they were best capable of protecting shareholders and equity in the firms ...
I discovered a flaw in the model that I perceived is the critical functioning structure that defines how the world works. I had been going for 40 years with considerable evidence that it was working exceptionally well. The overall view I take of regulation is, I took an oath of office when I became Federal Reserve chairman. I'm here to uphold the laws of the land passed by Congress, not my own predilections."
That's All Folks! ... except for maybe these parting thoughts for Al, sponsored by Bernie.
That one big Mis-calculation, indeed. ... 4 million citizens worth. Correct THAT Maestro, why don't ya?
Oh that's right ... "Because there's No Profit in it." Got it.