Question: Who could have known that deregulating the entire financial industry could lead to a disaster of such monumental proportions?
Former Federal Reserve Chairman Alan Greenspan, describing the current financial crisis as a “once-in-a-century credit tsunami” acknowledged Thursday that the crisis has exposed flaws in his thinking and in the workings of the free-market system.
Greenspan told the House Oversight Committee that his belief that banks would be more prudent in their lending practices because of the need to protect their stockholders had been proven wrong by the current crisis. He called this a “mistake” in his views and said he had been shocked by that.
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 the current crisis had “turned out to be much broader than anything that I could have imagined.”
Answer: Anyone who witnessed (and paid attention to) what happened to the Savings and Loan industry in the 1980’s after it was deregulated, Mr. Greenspan. In other words, those deregulated S&L’s did the same thing the investment banks and mortgage lenders did when they were let off their regulatory leash. They went hog wild with greed, and started running their businesses as if no transaction was too risky or stupid to make. After all, they were playing with other people’s money.
So ends another Question and Answer session brought to you by the good folks at We_arent_as_stupid_as_Alan_Greenspan.com.*
* Not a real website. Yet.
Update [2008-10-23 14:3:25 by Steven D]: A word from John “No Regrets” McCain:
