Waht Do You Say Now, Mr. Greenspan?

It isn't often that I find myself agreeing with the New York Times but, in my opinion, Times financial writer Peter Goodman and colleagues have put together an accurate and readable series on the roots of the current financial crisis.

In The Reckoning: Taking Hard New Look at a Greenspan Legacy (New York Times, October 8, 2008) Mr. Goodman examines what can best be described as former Federal Reserve Chairman Alan Greenspan's "love affair" with the one of the riskiest financial instruments to be created by man: the derivative.

Throughout his tenure as Chairman of the Federal Reserve, Mr. Greenspan was a staunch opponent of Congressional and regulatory agency efforts to curb the volatile derivatives market. Testifying before the Senate Banking Committee in 2003, Mr. Greenspan assured the Committee that all was well by saying "...we have found over the years in the marketplace is that derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn't be taking it to those who are willing to and are capable of doing so..." Instead, he reasoned, the derivative deals themselves would "police" their markets and assure that abuses would not occur.

To which I say: "So much for that idea, Mr. Greenspan."

Perhaps it was Mr. Greenspan's professed libertarian sentiments that led to his "hands off the derivative market" policy. An early convert to the objectivism of philosopher Ayn Rand, the rationale behind his actions regarding the derivative market seems to reflect his belief that the ideal of the modern, enlightened man has somehow taken root in today's financial markets and that regulation could be seen as a relic of the past.

If that is indeed the case, Mr. Greenspan was not only naive but negligent to a degree bordering on criminality. But Mr. Greenspan has plenty of company as he stands in the dock of public opinion.

He is joined by Daniel Mudd who, as Chairman of Fannie Mae, caved in to Congressional pressures to buy sub-prime mortgages and business loans even though his advisors had warned him that he was wading in very treacherous and untested financial waters.

Now the American taxpayers are paying the price of Mr. Mudd's intellectual cowardice.

And what can be said of the Congress, the supposed representatives of the public will? I'm afraid that the American people no longer have a voice in government policy. As P.J. O'Rourke has observed, the Congress has become nothing more than a Parliament of Whores whose support and influence can be purchased for a few votes or a "contribution" to a reelection campaign fund.

Someone once observed that we elect the government that we deserve. In light of the recent weeks' events I pause to wonder what the Republic has done to deserve such a burden.