Archive for the ‘Alan Greenspan’ Category

Opinion from The Los Angeles Times –

By Jonah Goldberg Sept. 30, 2008

On Sunday evening, Republican House Minority Leader John A. Boehner explained his considered opinion on the $700-billion Wall Street bailout plan: It’s a “crap sandwich,” he said, but he was going to eat it.

Well, it turned out he couldn’t shove it down his colleagues’ throats. The bill failed on a bipartisan basis, but it was the Republicans who failed to deliver the votes they promised. Some complained that Democratic Speaker Nancy Pelosi drove some of them to switch their votes with her needlessly partisan floor speech on the subject. Of course Pelosi’s needlessly partisan. This is news?

The Republican complaint is beyond childish. Democratic Rep. Barney Frank, a man saturated with guilt for this crisis, nonetheless was right to ridicule the GOP crybabies on Monday. “I’ll make an offer,” he added. “Give me [their] names and I will go talk uncharacteristically nicely to them and tell them what wonderful people they are and maybe they’ll now think about the country.”

Would that Frank had been imbued with such a spirit earlier. Frank, chairman of the House Financial Services Committee, has spent the last few years ridiculing Alan Greenspan, John McCain and others who sought more regulation for Fannie Mae’s market-distorting schemes — the fons et origo of this financial crisis. Now he says “the private sector got us into this mess.” His partner in crime, Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.), a chief beneficiary of Fannie Mae lobbyists’ largesse, claims this mess is the result of poor oversight — without even hinting at the fact he is in charge of oversight of banks. They sound like pimps complaining about the prevalence of STDs among prostitutes.

And let us not forget that the Democrats, with a 31-seat majority, could not get 95 of their own to vote for the bailout, largely because it didn’t provide enough taxpayer money to their left-wing special interests. Would that they thought about the country.

The one man who truly tried to treat this crisis like a crisis — McCain — was ridiculed by Senate Majority Leader Harry Reid, who implored him to come to Washington to help in the first place. And the news media, which now treat any Republican action that threatens a Barack Obama victory as inherently dishonorable, uncritically accepted the bald Democratic lie that McCain ruined a bipartisan bailout deal last Friday.

This is not to say that McCain knows what to do. Faced with an unprecedented financial crisis involving frozen global credit markets and a maelstrom of moral hazard, his standard response is to talk about wiping out earmarks and eliminating waste, fraud and abuse. Memo to Mr. McCain: Waste, fraud and abuse are the only things holding the system together at this point.

Obama is no better. The man has spent two weeks irresponsibly excoriating his opponent for saying the fundamentals of the economy are strong — a perfectly leaderly thing for McCain to have said during a panic. Then, campaigning in Colorado on Monday, the day the market plunged 777.68 points, Obama proclaimed: “We’ve got the long-term fundamentals that will really make sure this economy grows.”

Perhaps after Al Qaeda seizes Baghdad, a President Obama would finally declare, “Hey, we can win this thing!”

Meanwhile, President Bush, his popularity ratings stuck at below-freezing numbers, has decided to cling to Treasury Secretary Hank Paulson for warmth on the grounds that the vaunted former Goldman Sachs chair has the credibility to sell the solution to a problem he’s been exacerbating for 18 months. When a reporter for Forbes magazine asked a Treasury spokesman last week why Congress had to lay out $700 billion, the answer came back: “It’s not based on any particular data point.” Rather: “We just wanted to choose a really large number.”

There’s a confidence builder.

As for the reputedly free-market firebrands of the congressional GOP, with whom my sympathies generally lie, I cannot let pass without comment the fact that they controlled the legislative branch for most of the last eight years. Only now, when capitalism is in flames, does this fire brigade try to enforce the free-market fire codes without compromise.

I loathe populism. But if there ever has been a moment when reasonable men’s hands itch for the pitchfork, this must surely be it. No one is blameless. No one is pure. Two decades of crapulence by the political class has been prologue to the era of coprophagy that is now upon us. It is crap sandwiches for as far as the eye can see.

For years Alan Greenspan, the most famous central banker in the history of the job, spoke in a careful code. His chosen means of communication was the oracular observation, hedged around by qualifying subclauses, parenthetical asides and carefully balanced counterfactuals, that could be understood only by those with a detailed knowledge of monetary policy and financial markets.

He once told an audience, in all seriousness: “I guess I should warn you. If I turn out to be particularly clear, you’ve probably misunderstood what I’ve said.”

But with the publication of his memoir, The Age of Turbulence: Adventures in a New World, this week, it is as though the oracle has suddenly grabbed a microphone and started to gossip frantically about all the hopeless souls who had been consulting it all these years.

President Bush is portrayed as irresponsible and incurious (who knew?). The former Chairman of the US Federal Reserve says that Mr Bush presided over intolerable increases in government spending. “My biggest frustration remained the President’s unwillingness to wield his veto against out-of-control spending.”

He had hoped that his colleague from the Ford Administration, Dick Cheney, the Vice-President, would be a force for economic prudence and fiscal discipline. Instead, “I was soon to see my old friends veer off to unexpected directions”.

Republicans who controlled Congress for most of the past ten years “lost their way” and “swapped principle for power. They ended up with neither.”

By contrast, Mr Bush’s predecessor, Bill Clinton, was a “risk-taker”, who had shown a “preference for dealing in facts”, and something of a soulmate for the data-obsessed Mr Greenspan.

“Here was a fellow information hound . . . We both read books and were curious and thoughtful about the world . . . I never ceased to be surprised by his fascination with economic detail: the effect of Canadian lumber on housing prices and inflation . . . He had an eye for the big picture, too.”

When it emerged that he also had an eye for something else – an intern by the name of Monica Lewinsky – Mr Greenspan was left feeling “disappointed and sad”.

The first President Bush gets short shrift for trying to strong-arm the central bank into an easier monetary policy so that he could get reelected in 1992. (He failed.) President Reagan’s tendency to formulate policy and ideology from anecdotes represented an “odd form of intelligence”.

The Iraq war, Mr Greenspan says, was “largely about oil”. The excitement that that seems to have caused in some sections of the media might be tempered by his somewhat testy acknowledgement earlier in the book that he was left out of the inner circle of policy advisers around President Bush.

For all the chatty observations about politicians and events he encountered in 19 years at the Fed, for today’s turbulent financial markets it is his account of monetary policy in the past few years that is of most interest. To the growing number of Greenspan critics, the former Fed Chairman, who once enjoyed godlike status on Wall Street, is largely to blame for the sub-prime mortgage crisis that is behind today’s turmoil. They say he allowed a bubble to develop in the housing market between 2001 and 2006, his last five years at the Fed, when he cut interest rates too far and kept them low for too long. Mr Greenspan acknowledges that he did not see the scale of the problems in the sub-prime housing sector. “I didn’t really get it until very late in 2005 and 2006,” he said last night in an interview on CBS News timed to coincide with the book launch.

But he insists that the Fed was right to cut interest rates – to an historic low of 1 per cent by 2003 and to keep them there for a year – because of the very real risk of deflation.

“We wanted to shut down the possibility of corrosive deflation,” he argues. “We were willing to chance that by cutting rates we thought might foster a bubble, an inflationary boom of some sort, which we would subsequently have to address . . . It was a decision done right.”

He says that the housing bubble was caused, in any case, by other factors – mainly the end of communism, which brought new countries into the global economy and pushed down wages, prices and long-term interest rates (to which most US mortgages are tied).

He also argues that it is always better and easier for a central bank to respond – aggressively, if necessary – to the damaging effects of economic or financial events by cutting interest rates. That, at least, ought to resonate with Ben Bernanke, Mr Greenspan’s successor at the Fed.

Mr Bernanke and his fellow US central bankers gather tomorrow for the most important meeting of his short tenure so far, where the debate seems to be not about whether, but by how much, to cut interest rates in response to the financial turmoil of the past two months.

From The Times UK

AMERICA’s elder statesman of finance, Alan Greenspan, has shaken the White House by declaring that the prime motive for the war in Iraq was oil.

In his long-awaited memoir, to be published tomorrow, Greenspan, a Republican whose 18-year tenure as head of the US Federal Reserve was widely admired, will also deliver a stinging critique of President George W Bush’s economic policies.

However, it is his view on the motive for the 2003 Iraq invasion that is likely to provoke the most controversy. “I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil,” he says.

Greenspan, 81, is understood to believe that Saddam Hussein posed a threat to the security of oil supplies in the Middle East.

Britain and America have always insisted the war had nothing to do with oil. Bush said the aim was to disarm Iraq of weapons of mass destruction and end Saddam’s support for terrorism.

From The Sunday UK Times