The humiliation of Alan Greenspan last week in publicly admitting his fallible perception of the housing bubble prompts David Brooks to see a larger meaning:
"This meltdown is not just a financial event, but also a cultural one. It’s a big, whopping reminder that the human mind is continually trying to perceive things that aren’t true, and not perceiving them takes enormous effort."
It's also a reminder of what has always been the motivation, aside from greed, of not only the so-called experts but the run-of-the-mill stock market investor--the psychic need to be "in the know," to be able to see more than anyone else and profit from it.
In the era of 24/7 cable financial news, it's not just the talking heads but the watchers who are constantly trying to confirm their superior perception--a modern version of the traditional gambler's search for grace in the roll of the dice or turn of the cards--the need to feel superior to the rest of humanity.
"My sense," Brooks writes, "is that this financial crisis is going to amount to a coming-out party for behavioral economists and others who are bringing sophisticated psychology to the realm of public policy. At least these folks have plausible explanations for why so many people could have been so gigantically wrong about the risks they were taking."
Maybe so, but all that social science may end up just staring at that primal urge that drives human beings to prove themselves special by being "in the know."
Showing posts with label Alan Greenspan. Show all posts
Showing posts with label Alan Greenspan. Show all posts
Tuesday, October 28, 2008
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."
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."
Saturday, December 22, 2007
A Backward Presidency
George W. Bush started out to be Ronald Reagan, morphed into Richard Nixon and, toward the end, is starting to resemble Herbert Hoover.
The shanties, shacks and cardboard shelters in communities spawned by the Great Depression and known as Hoovervilles are showing up in 21st century America as a result of the sub-prime mortgage crisis that has doubled foreclosures of homes in the past year.
"Between railroad tracks and beneath the roar of departing planes," Reuters reports, "sits 'tent city,' a terminus for homeless people. It is not, as might be expected, in a blighted city center, but in the once-booming suburbia of Southern California.
"The noisy, dusty camp sprang up in July with 20 residents and now numbers 200 people, including several children, growing as this region east of Los Angeles has been hit by the U.S. housing crisis."
Not only are homeowners being dispossessed, but tenants are, too. A California realty firm estimates 20 percent of foreclosures are on homes bought as investment properties. Even after paying their rent, tenants are getting little notice before being evicted.
As former Federal Reserve Chairman Alan Greenspan takes most of the heat for not foreseeing the crisis, Paul Krugman points out the Bush Administration's share of the blame:
"Consider the press conference held on June 3, 2003--just about the time subprime lending was starting to go wild--to announce a new initiative aimed at reducing the regulatory burden on banks. Representatives of four of the five government agencies responsible for financial supervision used tree shears to attack a stack of paper representing bank regulations. The fifth representative, James Gilleran of the Office of Thrift Supervision, wielded a chainsaw...
"Two months after that event the Office of the Comptroller of the Currency, one of the tree-shears-wielding agencies, moved to exempt national banks from state regulations that protect consumers against predatory lending."
After weakening the patchwork of federal agencies to let banks run wild with loose loans, Bush, like Hoover, is responding with government action that is too little and too late. A Treasury Department plan to freeze mortgage rates has been deemed a failure even before it is in place.
It's a little like watching a lowlight reel of the 20th century being played backward at warp speed.
The shanties, shacks and cardboard shelters in communities spawned by the Great Depression and known as Hoovervilles are showing up in 21st century America as a result of the sub-prime mortgage crisis that has doubled foreclosures of homes in the past year.
"Between railroad tracks and beneath the roar of departing planes," Reuters reports, "sits 'tent city,' a terminus for homeless people. It is not, as might be expected, in a blighted city center, but in the once-booming suburbia of Southern California.
"The noisy, dusty camp sprang up in July with 20 residents and now numbers 200 people, including several children, growing as this region east of Los Angeles has been hit by the U.S. housing crisis."
Not only are homeowners being dispossessed, but tenants are, too. A California realty firm estimates 20 percent of foreclosures are on homes bought as investment properties. Even after paying their rent, tenants are getting little notice before being evicted.
As former Federal Reserve Chairman Alan Greenspan takes most of the heat for not foreseeing the crisis, Paul Krugman points out the Bush Administration's share of the blame:
"Consider the press conference held on June 3, 2003--just about the time subprime lending was starting to go wild--to announce a new initiative aimed at reducing the regulatory burden on banks. Representatives of four of the five government agencies responsible for financial supervision used tree shears to attack a stack of paper representing bank regulations. The fifth representative, James Gilleran of the Office of Thrift Supervision, wielded a chainsaw...
"Two months after that event the Office of the Comptroller of the Currency, one of the tree-shears-wielding agencies, moved to exempt national banks from state regulations that protect consumers against predatory lending."
After weakening the patchwork of federal agencies to let banks run wild with loose loans, Bush, like Hoover, is responding with government action that is too little and too late. A Treasury Department plan to freeze mortgage rates has been deemed a failure even before it is in place.
It's a little like watching a lowlight reel of the 20th century being played backward at warp speed.
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