ALAN GREENSPAN: PRINCIPLES OF FREE MARKET FLAWED

In testimony before Congress Alan Greenspan conceded that the fundamental principle behind republican theories of free markets is flawed. The NY Times reports:

Mr. Greenspan told the House Oversight Committee on Thursday that his belief that banks would be more prudent in their lending practices because of the need to protect their stockholders had proved to be wrong.

Mr. Greenspan said he had made a “mistake” in believing that banks operating in their self-interest would be enough to protect their shareholders and the equity in their institutions.

Mr. Greenspan said that he had found “a flaw in the model that I perceived is the critical functioning structure that defines how the world works.”

What? If you deregulate and put a pile of free money in front of people they might act stupidly and want more? You mean "overeager investors" might not take into account the threats posed by market fluctuations (that could lead to a housing collapse)? But ... but ... what about rationality? Aren't people who work in markets rational? You mean human beings might try and cheat one another, and might try to game the system, if they think they can get away with it? Who could have seen this?

The real incredible thing is that market people who pride themselves on being prudent and hard core realists believed their own naïve rhetoric. In the real world people will cheat one another if given the opportunity ... In the real world love stinks and really doesn't conquer much ... In the real world Bambie's Mother dies ... To believe that it could be any other way - especially in an arena driven by profit and money - suggests an embarrassing level of naïve utopianism, especially for people who like to claim a ruthless sense of individualism in markets.

Let's make this simple. My friends, the current market collapse is a product of undisciplined deregulation. It also illustrates what happens to common sense when it is mugged by greed, stupidity, and ideology.

- Mark

UPDATE: From Newsmax.com .... Former Federal Reserve Chairman Alan Greenspan told Congress in prepared testimony Thursday that the current global financial crisis is a "once in a century credit tsunami" that policymakers did not anticipate.

Let's be clear here. The current market mess is not a "once in a century" event. Serendipity has nothing to do with what has happened to our economy, and country. Greenspan is ignoring how real decisions driven by ideologues have an impact. He's also ignoring his role in making money so easy to get that all you needed was a pulse and a signature. It's time for Mr. Greenspan to stop making excuses and start accepting blame, especially for cheerleading the events that got us into this mess.