Back in 2002, when his reputation as \u201cThe Man Who Saved the World\u201d\u009d was at its peak, Alan Greenspan, former chairman of the Federal Reserve, came to Britain to pick up his knighthood. His biggest fan, Gordon Brown, now the UK prime minister, had ensured that the citation said it was being awarded for promoting \u201ceconomic stability\u201d\u009d.<\/p>\n
During his trip, Mr Greenspan visited the Bank of England\u2019s monetary policy committee. He told them the US financial system had been resilient amid the bursting of the internet bubble. Share prices had halved and there had been massive bond defaults, but no big bank collapses. Mr Greenspan lauded the fact that risk had been spread, using complex derivative instruments. One of the MPC members asked: how could this be? Someone must have lost all that money; who was it? A look of quiet satisfaction came across Mr Greenspan\u2019s face as he answered: \u201cEuropean insurance companies.\u201d\u009d<\/p>\n
Six years later, AIG, the largest US insurance company, has in effect been nationalised to stop it blowing up the financial world. The US has nationalised the core of its mortgage industry and the government has become the arbiter of which financial companies should survive or die.<\/p>\n