Thursday, October 9, 2008
Greenspan & Greenbacks
The NY Times takes a look at legacy of legendary Fed Chairman Allan Greenspan in a sweeping article today.
The article focuses on derivatives, a complex accounting instrument being blamed for the financial crisis gripping the world. Greenspan fought against any regulation of derivatives, while Warren Buffet famously derided them as "financial weapons of mass destruction."
Sadly, even today, Greenspan stands by his belief in derivative contracts. The Times writes:
The problem is not that the contracts failed, he (Greenspan) says. Rather, the people using them got greedy. A lack of integrity spawned the crisis, he argued in a speech a week ago at Georgetown University, intimating that those peddling derivatives were not as reliable as “the pharmacist who fills the prescription ordered by our physician.”
Somehow Greenspan failed to recognize a fundamental human characteristic: greed. In a playing field devoid of regulation, greed will always trump integrity. For such an intelligent man, Greenspan will likely go down in history as a tragically naïve student of human nature.