Friday, October 24, 2008

Greenspan, Greed and the Blame Game

Congressmen who used to hang on every word and kiss his ring got rough with the former Fed chairman today, as Henry Waxman bullied him to admit his fault for the subprime mortgage crisis ("Were you wrong?") and got a qualified mea culpa ("Partially").

The Greenspan grilling is at the respectable end of the national rage over the collapsing economy, bracketed on the far side of sanity by letters with white powder mailed to banks and regulatory agencies promising "payback time" for stealing people's money.

The rhetoric is different, but the impulse is the same: If the crops fail, find the witches who made it happen and burn them. But that didn't work in colonial times, and it certainly is not the answer to today's far more complex mess.

Greenspan, with his Ayn Randish faith in market greed, is far from innocent in the growth of the monstrous housing bubble, but he had plenty of help from fast-buck financial operators, politicians who resisted regulation and overreaching homeowners who thought prices would never fall.

Even his severest critic, Paul Krugman, has a kind word for him today, "At least he’s admitting that he got something wrong. That’s actually rare these days, especially among the people Greenspan associates with," quoting a memorable line, "For a man who was once remarkably hard to decipher, Alan Greenspan is now as clear as an empty Lehman Brothers office."

The rage will go on, certainly through Election Day, but after it runs its course, the new President and new Congress will have to settle down to making the hard choices that will get the country out of the ditch and persuade the public that doing that is more important than arguing over who drove us into it.

In an editorial today endorsing Barack Obama, the New York Times points the way:

"Mr. McCain offers more of the Republican every-man-for-himself ideology, now lying in shards on Wall Street and in Americans’ bank accounts. Mr. Obama has another vision of government’s role and responsibilities...

"Since the financial crisis, he has correctly identified the abject failure of government regulation that has brought the markets to the brink of collapse.

"The American financial system is the victim of decades of Republican deregulatory and anti-tax policies. Those ideas have been proved wrong at an unfathomable price, but Mr. McCain--a self-proclaimed 'foot soldier in the Reagan revolution'--is still a believer.

"Mr. Obama sees that far-reaching reforms will be needed to protect Americans and American business."

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