Can We Take Away Alan Greenspan's Pension?

[Donnachaidh]

http://www.smirkingchimp.com/thread/dean-baker/33987/can-we-take-away-alan-greenspans-pension

Joe Nocera gets most of the story right in his discussion of the Financial Crisis Inquiry's Commission's (FCIC) report today. There was gross negligence, greed, and outright fraud, but none of this would have lead to catastrophic consequences if we didn't have a housing bubble. (For that matter, having a housing bubble driven economy virtually guaranteed catastrophic consequences, even without the financial abuses. Spain, which had a well-regulated banking system and no financial crisis, keeps reminding us of this fact, with its 20.6 percent unemployment. The commission was off on the wrong foot from the outset in looking at the "financial crisis." The real crisis is an economic crisis caused by the collapse of an asset bubble which had been the engine of growth in the economy.)

Nocera blames the mass delusion that house prices could rise endlessly with no foundation in the fundamentals of the housing market. This is absolutely right, but there is a key point missing. We have regulators, most importantly central bankers like Alan Greenspan and Ben Bernanke, who are not supposed to succumb to mass delusions. They are supposed to make their assessments of the economy based on a measured analysis not the hysterical rantings of the deluded masses.

Using simple economic analysis and the arithmetic we all learned in 3rd grade it was possible to recognize the housing bubble as early as 2002. It was also possible to know that the bursting of the bubble would be bad news for the economy and that the news would get worse as the bubble grew larger.

The Fed had enormous power with which to shoot at the bubble. First, Greenspan and Bernanke could have used the resources of the Fed to document the evidence for the existence of the bubble and highlight the consequences of its bursting. Note that this is not about mumbling "irrational exuberance." The idea is have the Fed's research staff put out paper after paper showing that house prices were hugely out of line with their historic levels with no plausible explanation in the fundamentals. This research could have been highlighted in Congressional testimony and other public appearances by Greenspan and other top Fed officials.

More at the link --

[hobbit709]

1. Let him put his money where his mouth is.

[unblock]

2. he wouldn't miss it a few more years of a government pension.

besides, he should be in prison for lying to congress. if nothing else, about his testimony at the start of the shrub adminstration about the dangers of a budget surplus. yes, that's right, he actually testified that the projected surplusses would eventually pay down the entire national debt and THEN OMG what do you do with the extra money!!!11!!

this testimony was key in getting congress to pass the insanely irresponsible, fiscally stupid, and distributionally unfair shrub tax cuts, which in turn has much to do with the ridiculous fiscal position we're in today as well as the lack of funds for the government to do its job properly over the last decade.