Greenspan and "Free" Markets

Saw this in the NY Times.  Alan Greenspan has said for the first time that he made errors in judgment during the huge subprime boom.  Actually, I specifically remember him supporting subprime mortgages because he was the most quoted guy in the mortgage banking industry.  He said that subprime mortgages were great because they allowed more people to get into homes.

WASHINGTON — For years, a Congressional hearing with Alan Greenspan was a marquee event. Lawmakers doted on him as an economic sage. Markets jumped up or down depending on what he said. Politicians in both parties wanted the maestro on their side.

But on Thursday, almost three years after stepping down as chairman of the Federal Reserve, a humbled Mr. Greenspan admitted that he had put too much faith in the self-correcting power of free markets and had failed to anticipate the self-destructive power of wanton mortgage lending.

“Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief,” he told the House Committee on Oversight and Government Reform.

My goodness.  What a change of direction, especially given the fact that Greenspan is perhaps the most well known proponent of Ayn Rand’s leave-it-to-the-market philosophy.  Not only did Ayn Rand leave us with horrible literature that kills brain cells, but it turns out that she was also wrong about the markets.  All I can say is…wow.

I’m going to take this a step further to apply it to Asian American culture.  A favorite comment of rice chasers and the like is that Asian American culture and race relations are dictated by a silent market, i.e. things are the way they are because they naturally fall into patterns.  If these huge companies with smart people can’t avoid a bust in the market, how can chasers claim a free market in race relations, especially given the fact that minorities have so little voice in the media which often influences the direction of race relations?

Something to ponder.

No related posts.