Every now and then, even the smartest of us need to relearn the lessons of American history. Take Alan Greenspan and the unfolding story of the current credit crisis. Greenspan, former chairman of the Federal Reserve, is “the Oracle” given much of the credit for America’s great economic boom — and now some of the blame for the bust.
Critics say it was the growth of largely unregulated investments known as derivatives — which Greenspan encouraged and defended — that helped produce the present crisis. Greenspan’s defense of these investments was based in part on an optimistic view of human nature. Excesses, he believed, would be prevented because individuals would restrain the worst of their greed and self-interest to protect their own reputations.
I still maintain that there were wolves in both houses – the lenders who issued sub rate securities and buyers who lacked enough financial sense to even be allowed to buy them.