Jan 18, 2008

Greenspan's Divinity In Question?

Interesting Op-Ed in today's New York Times by Paul Krugman. He has a look at the current problems confronting the US economy and while doing so points the spot light on former Fed Chair Greenspan (and on Bush):

What should have been done differently? Some critics say that the Fed helped inflate the housing bubble with low interest rates. But those rates were low for a good reason: although the last recession officially ended in November 2001, it was another two years before the U.S. economy began delivering convincing job growth, and the Fed was rightly concerned about the possibility of Japanese-style prolonged economic stagnation.

The real sin, both of the Fed and of the Bush administration, was the failure to exercise adult supervision over markets running wild.

It wasn’t just Alan Greenspan’s unwillingness to admit that there was anything more than a bit of “froth” in housing markets, or his refusal to do anything about subprime abuses. The fact is that as America’s financial system has grown ever more complex, it has also outgrown the framework of banking regulations that used to protect us — yet instead of an attempt to update that framework, all we got were paeans to the wonders of free markets.

This article that is due to appear in the New York Times Sunday Magazine by Roger Lowenstein is in similar space.....