What Hath Ayn Rand Wrought
Assuming the role of economic neophyte, we have Greenspan’s CYA testimony
(CBS/ AP) Former Federal Reserve Chairman Alan Greenspan says the current financial crisis has uncovered a flaw in how the free market system works and that has shocked him.
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 proven in the latest crisis to be wrong.
Greenspan said he had made a “mistake” in believing that banks in operating in their self-interest would be sufficient to protect their shareholders and the equity in their institutions. 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.”
Obviously higher education was totally wasted on Alan Greenspan, as he was totally unprepared for the presence of greed in the financial system. Taking his economic views from a novelist he assumed that peace and love were the predominate forces in the market place and people did the honorable thing because it was the honorable thing, despite centuries of evidence showing that there are crooks and conmen in every line of work, including the Federal Reserve system.
His testimony might have been more convincing if he wasn’t on the record as a supporter of ARMs and other forms of subprime loans when the rate for conservative, old-fashioned conventional mortgages was at its lowest point in years. It would also help cover his tracks if the housing bubble hadn’t followed hard on the heels of the dot com bubble, another disaster on his watch that demonstrated the casino atmosphere of the stock market.
Greenspan should have stayed with the saxophone as there is evidence that he knew how that worked.
18 comments
What a bunch of baloney. There was abundant evidence throughout his tenure that greed was a driving force in the market place. He just chose to ignore it and even encourage it by his lack of action. His legacy is evident now that the chickens have come to roost.
He might have gotten a pass for one bubble, but not two in quick succession.
I still don’t believe his recommendation of ARMs when the fixed rate was 5% and it was obvious that rates were going to increase. If the rate is 9% an ARM might make sense because historically the rate would tend to come down, but you are borrowing trouble at 5%.
…like I said over yonder tonight, one of the ways to become the supreme god of all things economic is to hold fast to a clean, clear belief in the enlightened economic self-interest of financial corporations unfettered by several millenia of human proof to the contrary. He isn’t just at fault; he is the main perp who provided cover for everything that led to the place we are now…
He believed his own press clippings. I don’t buy it – no one could live to adulthood and believe that the banks weren’t driven by greed. The system in place for executive pay is guaranteed to elevate and reward the gamblers. No one makes it to the top without taking stupid risks that result in extreme profits. These people do not think long term and the survival of the corporation, they think exclusively within the term of their current contract.
stupid risks?!
these people have all made out like bandits. the only risks they took were between winning big and winning bigger, and sometimes they only won big.
This article is so of the mark, it must be completely unresearched, or the author has his own agenda and does not give a damn for the truth. See Would the Last Honest Reporter Please Turn On the Lights? by Orson Scott Card.
From The American Competitive Enterprise Institute:
“While the Dow collapses, we have a bull market in government regulations. The 50-plus departments, agencies and commissions are now at work on 3,882 rules; 757 will affect small businesses. More than 51,000 final rules were issued from 1995 to 2007.”
That’s 51,000 NEW regulations, added to what was there before.
http://cei.org/articles/%E2%80%98hidden-tax%E2%80%99-rules-hits-economy
On another of their web pages:
“Well over 48,000 final rules were issued from 1995 to 2006–that is, during Republican control of Congress.”
That is hardly Rand’s laissez-faire capitalism; that’s fascism/corporatism & socialism. At root, those are the very ideologies Rand spent her lifetime hoping to save Americans and America from. Now, when the effects of those destructive ideologies, at work in Washington, hits the fan, everyone is blaming capitalism instead; they are ridiculous.
Consider reading “Capitalism: The Unknown Ideal” after, and to see how, “The Virtue of Selfishness” really works, and why Capitalism is the only moral system. Greenspan dropped any pretense of understanding her arguments sometime before he became head of the Fed., and he then became a major part of the problem. His monetary policy and suppression of interest rates, when Rand would have said “let the market decide” were an appalling government intervention. Add in The CRA, CDS, Fannie Mae, Freddie Mac and the recipe for a distorted market was complete.
So there YOU are, a CEO of a large financial organization. Your competitors are complying with the regulations and are making good for their shareholders, and things are getting tight for your firm. what do you do? You join in. If you are able to understand the fraud in the government’s game, you build yourself some protection for when the bubble bursts… but most people, like you and your commenters, are not that smart. Still, none of you would have dared played your game that way if it were not for a handful of people in the US government who believed they were more intelligent than the free market. Without those people, lending rates would have adjusted themselves years ago, paper money would not have been printed like it grew on trees (e.g. “helicopter Bernanke”) and the present crisis would not even have been imagined.
There have been some billion dollar losses before the trillion dollars in the Ponzi scheme collapsed. They keep getting overlooked as events caused by “a few bad apples” with no one admitting that the whole “orchard” is rotted.
I hate to break this to you, RnBram, but you are totally full of bullshit. The fact that you suggest anyone read a fundamentalist Mormon science fiction writer to support your case shows the level of foolishness in your concept.
Unfortunately the facts of Greenspan’s personal and professional involvement with Ms Rand and her fictional world are well known and documented. Attempting to create a separation that never existed is to deny reality, something you obviously do.
As a small business owner has been hired by Fortune 50 corporations as a consultant, I am well aware of how the current system works. In case no one has ever explained it to you, regulations are only relevant if they are enforced, and there has been a total lack of enforcement for some time.
If you truly understood capitalism, you would know it isn’t possible as long as corporations exist. Until corporations lose their limited liability there can be no true free market. The possibility of that happening anytime in the foreseeable future is nil.
Before you arrived to pull down the average, the commenters on this thread had an average IQ well above the minimum requirement for Mensa. While I admit that as a group we are heavily skewed to the technologies and engineering, among the thousands of semester hours of education represented there is a significant portion devoted to business.
I would also note that I have a personal investment plan that moved me out of the market when a Republican was elected to the White House. If you studied the market with any diligence you would know that you invest in cash and bonds with a Republican President, and stocks with a Democrat, because historically the market only outperforms inflation under a Democratic administration.
I haven’t lost any money in this disaster. My “low return” investments have made money beyond inflation and my retirement is not affected in any way.
Your “everyone else was doing it” defense of CEOs is juvenile, literally. That is something you hear from children, not adults. That is an excuse for lemmings, which have a lot in common with followers of whacky ideas put forth by novelists.
Oh wow… Orson Scott Card has gone batshit crazy with that article. Who’d have guessed the entire financial crisis would have been prevented if banks didn’t lend to poor people who, as we all know now, won’t pay back their mortgages.
LOL OK… Now I’m laughing! LOL
Orson Scott Card should stick to his Science Fiction/Fantasy… oh… he has! LOL
In case no one has ever explained it to you, regulations are only relevant if they are enforced, and there has been a total lack of enforcement for some time.
Yup! Right on the money with that one Bryan.
Greenspan is just doing the usual republican shortsighted, ignorant fantasy world of “But it should have worked! If everyone had just done it by the playbook, it would have worked! It’s not my fault! They didn’t do what I said! Boo hoo”… Ya know how it goes… expect to hear a hell of a lot more of this over coming months and years about pretty much everything. We’ve already been hearing it about Iraq & Afghanistan, it”l get worse. 🙂
“Poor” people tend to be a whole lot more careful with their money than “rich” people, and some of those “poor” people who were finally able to buy homes because of the CRA were long-time civil service employees and teachers who happened to want to live in “bad neighborhoods” where they could afford to buy a house.
The housing bubble started and ended in South Florida, and I can guarantee that no one was using the CRA to buy a condo in Cape Coral. Builders weren’t putting up affordable homes down there, it was all condos and McMansions in hurricane evacuation zones. People got crushed by a bad economy, ARMs resetting, and spikes in property taxes and property insurance costs.
I remember people asking my advice during the dot com bubble, and pointing out that a couple of people with a web site hosted on a server in their bedroom with no obvious revenue stream did not justify spending $100 on a share of their stock. Market share was only meaningful if there was an actual market, i.e. cash flow outside of the stock market.
I get really annoyed with “true believers”, they always have excuses when their “ideal model” fails. I have read some brilliant people like Chomsky, Pauling, and Azimov who are without peer in their fields, but you hand them real life and they go round the bend. I didn’t think Ayn Rand was all that great as a novelist, and L Ron Hubbatd was a hack, but their followers are something to behold.
Ah well… L Ron Hubbard = Scientology. LOL What more needs to be said? 🙂 Scientology has managed to out-con even the Mormons or … [insert any other religion here] LOL
*shrug* sure proves there are many stupid people out there.
The people who read and love JRR Tolkien and JK Rowling love the books but understand they are works of fiction. They seem to understand the “fantasy” label.
Other authors seem to fill an odd shaped void in the lives of some seemingly intelligent people, and the authors apparently believe their own delusions.
The real world exists and you have to live in it. A fantasy only works for so long, just ask the Hedgemony.
in defense of lemmings
Somehow I was sure you would come by to complain about my mischaracterization of the actions of lemmings, but considering the maturity of the comment I was responding to the finer points of animal behavior patterns would be lost.
When you base your world view on the ranting of people famous for writing fiction actual knowledge of Arctic animals is too much to ask.
sigh… i’m so transparent.
Orson Scott Card should stick to his Science Fiction/Fantasy… oh… he has!
😆 😆 😆 😆 😆
Well, there is the name of your blog to tip people off, Hipparchia. Yes, Kryten knows how to zing.