Greenspan’s Meta-Defense

Posted on


PH2006012700873 1

Alan Greenspan’s defense of his own conduct, as reported by Sewell Chan and Eric Dash, is very oddly second-order. Should he have cracked down on abusive lending practices? Well, he doesn’t quite say:

In his testimony, an unflinching Alan Greenspan, the former fed chief, fended off a barrage of questions about the Fed’s failure to crack down on subprime mortgages and other abusive lending practices during his lengthy tenure, pointing out that the Fed warned about subprime lending and low-down-payment mortgages in 1999, and again in 2001. He argued that if the Fed had tried to rein in the housing market amid a “fairly broad consensus” about encouraging homeownership, “the Congress would have clamped down on us.”

I don’t think the claim there is crazy, and it is one reason why I think some people are wrong to place blame so heavily on Greenspan personally. That said, a better smarter Fed Chair would have seen the problem and tried to stop it. It’s true that a better smarter Fed Chair might have been clamped down on by Congress, but that still leaves us with the fact that Greenspan was a worse dumber Fed Chair. I also have some real doubts about Greenspan’s analysis—he was probably the most prestigious policymaker in the country and very plausibly could have gotten his way, had his way been the right way.

And then this:

And under sharp questioning other members of the panel about the Fed’s staffing levels, he insisted that a lack of resources or funds was not to blame for any regulatory missteps. “It is not an issue of people,” Mr. Greenspan testified. “It is rather an inherently difficult job.”

Sure, it’s a difficult job. But that’s why Greenspan became such a prestigious figure when people thought he was doing a good job. Now that it turns out to have been a not-so-good job, you can’t just turn around and say “it’s hard!” Lots of things are hard.