Wed Mar 19th, 2008 at 05:29:30 AM EST
FT.com: Letters - We should reject this extremism of Greenspan's (March 19 2008)
From Mr Jérôme Guillet.
Sir, It was oddly fitting that Alan Greenspan should argue in favour of continued self-regulation of the financial sector ("We will never have a perfect model of risk", March 17) on the very day that self-regulation demonstrated its absolute failure, as the only solution to avoid complete market panic and collapse was seen to be public intervention in the form of massive Fed guarantees over Bear Stearns liabilities.
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After denying for years that there was any asset bubble, Mr Greenspan now describes it in excruciating detail, and concludes that it was inevitable, because it is the very nature of financial markets to be occasionally irrational, and to engage in booms and busts. Such a (correct) assessment would seem to be a call for much stricter regulation of how the financial world can be allowed to play with other people's money to limit such cycles. Instead, his insistence that nothing of the kind should be done is an extraordinarily explicit call to privatise financial profits (during the boom) and socialise losses (in the aftermath). As such, it should be treated with all the respect that political extremism deserves; ie, none.