"Mr. Greenspan declined requests for an interview."
The Reckoning - Taking Hard New Look at a Greenspan Legacy - Series - NYTimes.com
"In a market system based on trust, reputation has a significant economic value," Mr. Greenspan told the audience. "I am therefore distressed at how far we have let concerns for reputation slip in recent years." <...> In 1992, Edward J. Markey, a Democrat from Massachusetts who led the House subcommittee on telecommunications and finance, asked what was then the General Accounting Office to study derivatives risks. Two years later, the office released its report, identifying "significant gaps and weaknesses" in the regulatory oversight of derivatives. "The sudden failure or abrupt withdrawal from trading of any of these large U.S. dealers could cause liquidity problems in the markets and could also pose risks to others, including federally insured banks and the financial system as a whole," Charles A. Bowsher, head of the accounting office, said when he testified before Mr. Markey's committee in 1994. "In some cases intervention has and could result in a financial bailout paid for or guaranteed by taxpayers." In his testimony at the time, Mr. Greenspan was reassuring. "Risks in financial markets, including derivatives markets, are being regulated by private parties," he said. "There is nothing involved in federal regulation per se which makes it superior to market regulation."
<...>
In 1992, Edward J. Markey, a Democrat from Massachusetts who led the House subcommittee on telecommunications and finance, asked what was then the General Accounting Office to study derivatives risks.
Two years later, the office released its report, identifying "significant gaps and weaknesses" in the regulatory oversight of derivatives.
"The sudden failure or abrupt withdrawal from trading of any of these large U.S. dealers could cause liquidity problems in the markets and could also pose risks to others, including federally insured banks and the financial system as a whole," Charles A. Bowsher, head of the accounting office, said when he testified before Mr. Markey's committee in 1994. "In some cases intervention has and could result in a financial bailout paid for or guaranteed by taxpayers."
In his testimony at the time, Mr. Greenspan was reassuring. "Risks in financial markets, including derivatives markets, are being regulated by private parties," he said.
"There is nothing involved in federal regulation per se which makes it superior to market regulation."
Just like food safety regulation: sure, a company that sells deadly products might not satay in the market very long, but it's going to be a small comfort for those that die from its products before its reputation is touched... In the long run, we're all dead. John Maynard Keynes
His support was instrumental in getting Congress to approve cuts thaty many of them were wary about.
And his responsibility in propping up the bubbles in the late 90s and then throughout the noughties (denying that there even was a bubble, and keeping Fed rates absurdly low for way too long) cannot be overstated.
Quite simply, he behaved like a hawk, and used his "credibility" on the markets (earned thanks to his frequent use of the "Greenspan put", ie using monetary policy to prop up markets when they went down) for narrow political goals. In the long run, we're all dead. John Maynard Keynes
So, read it again:
Systemic risk, counterparty risk, moral hazard. All known, and wilfully ignored. In the long run, we're all dead. John Maynard Keynes
