News Release

Greenspan Expert

The lead piece in the Washington Post today is “Greenspan Says he was Wrong on Regulation.” (The piece is critiqued by economist Dean Baker, who continuously warned of the ramifications of the housing bubble since early in this decade.)

ROBERT AUERBACH
Professor of public affairs at the University of Texas at Austin, Auerbach wrote the new book Deception and Abuse at the Fed: Henry B. Gonzalez Battles Alan Greenspan’s Bank. Auerbach was an economist with the House Committee on Financial Services including during a period when Texas Congressman Gonzalez attempted to achieve a level of meaningful oversight over the Fed. Gonzalez was continuously thwarted by Greenspan.

Auerbach said today: “Yesterday, Alan Greenspan’s testimony contained the same type of dodges that the master of garblements had displayed in the 1990s when he achieved saint-like status as leader of the Federal Reserve. Greenspan’s response to questions about the causes of the current economic crisis included the unreliability of predictions and the failure to regulate one particular financial derivative. That narrowing of causes hides his dismal record on regulation.

“Greenspan had already been through a financial crisis and should have known exactly why better regulation was needed. Greenspan fought House Financial Services Chairman Henry B. Gonzalez, who pushed for needed regulation that was plainly illustrated after the savings and loan/banking crisis that ended in the early 1990s.

“The Clinton administration called for a rational bank regulatory system by consolidating the bank regulators into one agency. Greenspan railed against the idea and talked about the need for ‘hands-on regulation’ by the Fed. Gonzalez replied that Greenspan failed to tell us where the Fed really has its hands and that the only hands that should be on Federal Bank regulation are those of a neutral bank regulator. Since two-thirds of the nine directors at each of the twelve Federal Reserve Banks are elected by the banks in their district, there are profound conflicts of interest with bankers regulating themselves.

“In his 2007 book, The Age of Turbulence, Greenspan changed his mind and said that ‘hands-on supervision and regulation’ is ‘being swamped.’ That was last year when he wrote ‘We have no sensible choice other than to let markets work.’ Yesterday he testified he was wrong about his hands-off regulatory philosophy. The 2007 hands-off regulatory philosophy was a change from his previous hands-on regulatory stance. This is not philosophy. It is the ‘master of garblements,’ the title of Chapter 3 in my book Deception and Abuse at the Fed: Henry B. Gonzalez Battles Alan Greenspan’s Bank.”
More Information

For more information, contact at the Institute for Public Accuracy:
Sam Husseini, (202) 347-0020; or David Zupan, (541) 484-9167