Former Fed chief Alan Greenspan may very well enjoy second-guessing the country's current financial leadership. The thing is, he's not guessing with his comments today. He's merely restating reality.
He's actually describing the current ad-hoc relationship that the Fed has begun building with the Treasury Department, although he doesn't name it as such. The quote above neatly summarizes the government's response to Bear Stearns' collapse. And I thought I was alone in my penchant for stating the obvious.
I'm not convinced that a new set of laws will mean much to policymakers with so much (already de facto) new power. The Fed's charter gives it a legal mandate to fight inflation, but Helicopter Ben chooses to ignore it.
It almost sounds like the Maestro has learned something from his own injections of liquidity into the economy after 9-11. This may be as close to a mea culpa as we will ever hear from Mr. Greenspan for his contribution to inflating this decade's housing bubble. Perhaps I'm reading too much into this.
A high-level panel of financial officials should be given broad authority to quickly determine whether a failing company poses a sufficient threat to the entire U.S. economy, he recommends. If so, the company would be shut down.
He's actually describing the current ad-hoc relationship that the Fed has begun building with the Treasury Department, although he doesn't name it as such. The quote above neatly summarizes the government's response to Bear Stearns' collapse. And I thought I was alone in my penchant for stating the obvious.
"We need laws that specify and limit the conditions for bailouts -- laws that authorize the Treasury to use taxpayer money to counter systemic financial breakdowns transparently and directly rather than circuitously through the central bank as was done during the blowup of Bear Stearns," Greenspan wrote in a new epilogue to the paperback edition of his memoir, "The Age of Turbulence: Adventures in a New World."
I'm not convinced that a new set of laws will mean much to policymakers with so much (already de facto) new power. The Fed's charter gives it a legal mandate to fight inflation, but Helicopter Ben chooses to ignore it.
"Much as we might wish otherwise, policymakers cannot reliably anticipate financial or economic shocks or the consequences of economic imbalances," Greenspan says.
It almost sounds like the Maestro has learned something from his own injections of liquidity into the economy after 9-11. This may be as close to a mea culpa as we will ever hear from Mr. Greenspan for his contribution to inflating this decade's housing bubble. Perhaps I'm reading too much into this.
