Waxman, Frank admit error
Friday, October 24th, 2008 By Mike Maurer
There’s a headline you’ll never see. It’s doubtful the question will ever be posed. But, boy oh boy, the markets? Why, they’re stinkin’ with error! Stinkin’!
Check out the loaded innuendo in this story in the New York Times (excerpted and absurdities highlighted in the “read more” section below). The Wall Street Journal and AP do a bit better, but for a much more honest and capable discussion of the quotes, try this Globe and Mail story.
It’s all remarkable, really. People pretend that probabilities don’t mean probabilities, and that government causes us to walk in eternal sunshine. Eternal grey drizzle, is more like it. (Meanwhile, can we get Waxman on record to talk about Social Security and Medicare and Medicaid? If everyone thinks this is bad, wait until the dollar and t-bills collapse. Heck, Waxman might still be in office when that happens.)
Greenspan Concedes Error on Regulation
a humbled Mr. Greenspan admitted that he had put too much faith in the self-correcting power of free markets and had failed to anticipate the self-destructive power of wanton mortgage lending.
. . . Democratic lawmakers asked him time and again whether he had been wrong, why he had been wrongwhether he was sorry.[ed.-Are you kidding? What is this Communist Chinese public confession?] and
Critics, including many economists, now blame the former Fed chairman for the financial crisis
“You had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others,” said Representative Henry A. Waxman of California, chairman of the committee. “Do you feel that your ideology pushed you to make decisions that you wish you had not made?”
Mr. Greenspan conceded: “Yes, I’ve found a flaw. I don’t know how significant or permanent it is. But I’ve been very distressed by that fact.” [$100 says that this is not a transcript quotation, that this answer did not directly follow this question as it appears to in the story.]
Mr. Greenspan refused to accept blame for the crisis but acknowledged that his belief in deregulation had been shaken. [ed.-Which is it? Did he admit he felt pushed by ideology or did he refuse to accept blame?]
“This modern risk-management paradigm held sway for decades,” he said. “The whole intellectual edifice, however, collapsed in the summer of last year.”
Mr. Waxman noted that the Fed chairman had been one of the nation’s leading voices for deregulation, displaying past statements in which Mr. Greenspan had argued that government regulators were no better than markets at imposing discipline.
“Were you wrong?” Mr. Waxman asked.
“Partially,” the former Fed chairman reluctantly answered, before trying to parse his concession as thinly as possible. [ed.-Gee, Mr. Neutral Reporter in a Neutral News Story, did he succeed in parsing his concession as thinly as possible?]
Mr. Greenspan brushed aside worries about a potential bubble, arguing that housing prices had never endured a nationwide decline and that a bust was highly unlikely.
Mr. Greenspan, along with most other banking regulators in Washington, also resisted calls for tighter regulation of subprime mortgages and other high-risk exotic mortgages that allowed people to borrow far more than they could afford.
The Federal Reserve had broad authority to prohibit deceptive lending practices under a 1994 law called the Home Owner Equity Protection Act . But it took little action during the long housing boom, and fewer than 1 percent of all mortgages were subjected to restrictions under that law.
Many Republican lawmakers on the oversight committee tried to blame the mortgage meltdown on the unchecked growth of Fannie Mae and Freddie Mac, the giant government-sponsored mortgage-finance companies that were placed in a government conservatorship last month. Republicans have argued that Democratic lawmakers blocked measures to reform the companies.
But Mr. Greenspan, who was first appointed by President Ronald Reagan, [ed-Be sure to get the Reagan name in there, so we can discredit individual freedom once and for all] placed far more blame on the Wall Street companies that bundled subprime mortgages into pools and sold them as mortgage-backed securities.
Despite his chagrin over the mortgage mess, the former Fed chairman proposed only one specific regulation: that companies selling mortgage-backed securities be required to hold a significant number themselves.
“Whatever regulatory changes are made, they will pale in comparison to the change already evident in today’s markets,” he said. “Those markets for an indefinite future will be far more restrained than would any currently contemplated new regulatory regime.”
