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"We will never have a perfect model of risk" as Greenspan says, but he does appear to have the perfect model of risk management:  I.e privatise the profits in good times, and socialise the losses in bad - as is most precisely demonstrated by the current Fed risk guarantees to Morgan Stanley for the takeover of Bear Stearns.

The FED is effectively underwriting the profligacy of the rich with the Dollars of the poor - the taxpayers who didn't benefit from the "tax cuts for the rich" mantra of Fed policy since Reagan, and most pronounced under Greenspan.  

The one thing that IS entirely predictable is that periods of "irrational exuberance" will occur if the major players know that the benefits are all private, and the risks will be borne by the public.

Way to go Greenspan, by dismantling the regulatory safeguards for the public you have succeeded in transferring the costs of speculation to those who had to pay inflated prices for their houses in the first place.

"It's a mystery to me - the game commences, For the usual fee - plus expenses, Confidential information - it's in my diary..."

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Mar 17th, 2008 at 10:58:59 AM EST

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