Greenspan and the Economic Meltdown

Today was an interesting day on Capitol Hill as former Federal Reserve Chairman Alan Greenspan was grilled by a government panel about his possible role in the economic meltdown in late 2008. This was part of a series of investigations into what exactly pushed the economy over the edge and caused the huge credit crisis. Washington Sketch a new column by Dana Milbank on the Washington Post’s website has some good coverage of the panel and Greenspan's claims. The column speaks about the investigation and it is an interesting look into the blame game played by the former Fed. Chief.

Subprime Loans Did Not Cause Financial Crisis

According to Greenspan, subprime loans were not responsible for the financial crisis as the public has been led to believe. Greenspan went on to say that factors such as: demand for higher risk, credit agencies “grossly inflated credit ratings,” and lack of capacity to oversee were all reasons for the economic collapse.

It's Not My Fault

It is quite amazing how Greenspan just won’t admit any wrong doing in this whole process. No doubt the credit agencies share some blame in this as well, but if they take blame then the Federal Reserve certainly should as well. Greenspan said today he was right 70% of the time when he headed the board and he thought that was a great percentage. He even went as far as to throw the late Fed Governor Edward Gramlich under the bus because he said Gramlich failed to bring certain issues to his attention.

Avoiding the Real Issue

The avoidance of the real issue in a setting like this is confusing. How does Greenspan not see that interest rates and his comments on the housing market’s good health (which obviously turned out to be wrong) contributed to the problem? I applaud the government for having panels such as these, but as long as all that happens is the blame game and passing of the buck, the real issue won’t be solved!