Greenspan Final

Greenspan Final Like Presidency of George W Bush unfortunately no matter how popular both President Bush and his chief banker –Alan Greenspan were in the past- they get judged for the ongoing situations that date back to when they were making decisions or had the potential to make decisions. Earlier this month we looked at the 2008 Financial collapse of a whole section of the banking industry which the successors to Alan Greenspan had to deal with- therefore I go back to ‘Too Big to Fail’ to get comment on the opinions of those struggling with that situation in 2008 thought of Greenspan. ‘Hard act to follow –It was perhaps an inevitable epithet for the man whom Washington Post reporter Bob Woodward had also dubbed ‘The Maestro’- Alan Greenspan, who was to fiscal policy what Warren Buffet was to investing. Greenspan had overseen the Federal Reserve during a period of unprecedented prosperity, a spectacular bull market that had begun during the Regan administration and had run for over twenty years. Not that anyone outside the economics profession had a clue what Greenspan was doing or even saying most of the time. His obfuscation (My editor tells me this is the word he would use to describe my –‘what on earth is he saying’ style) in public pronouncements was legendary which only added to the mystic of his great intellect. Bernanke by contrast…. His area of specialization- The Great Depression and what the Federal Reserve had done wrong in the 1920s and 30s seemed quaint… By the summer of 2007 America’s Second Gilded Age had come shockingly to an end and Greenspan’s reputation lay in tatters. His faith in the market being self correcting suddenly seemed fatally short sighted; His cryptic remarks were judged in hindsight as confused ramblings of a misguided ideologue. … Norway might have sub prime mortgages from California in its portfolio and not even realize it. Making matters worse many financial firms had borrowed heavily against these (utterly insecure-Ed) securities, using what is known as leverage to amplify their returns. This only increased the pain when they began to lose value. Regulators around the world were having trouble understanding how the pieces fitted together. Greenspan would later admit that even he hadn’t comprehended exactly what was happening. ‘I’ve got some fairly heavy background in math but some of the complexities of some of the instruments that were going into CDO’s bewildered me. I didn’t understand what they were doing or how they actually got the types of returns out of the mezzanines and various tranches of the CDO that they did. And I figured that if I didn’t understand it and I had access to a couple of hundred PhD’s how was the rest of the world to understand it sort of bewildered me’ He was not alone. Even the CEOs of the firms that sold these products had no better comprehension at all.’ P85, 90 Too Big to Fail A.R.Sorkin New York 2009