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The only time Greenspan could have meaningfully intervened was back in 2002 or earlier, and even then intervention would have caused enough pain to have the med

The only time Greenspan could have meaningfully intervened was back in 2002 or earlier, and even then intervention would have caused enough pain to have the media deem it a "crisis" in itself. Notably he did speak up about Fannie and Freddie in the early 2000s but was silenced by the GOP's drive to make war -- nobody wanted the economy cooled at all when gas prices were already creeping up. So what's the man to do now? He could admit all that about the war and cast serious doubt on the Fed's independence and the US financial system, or he could insist that the boom/bust was a complete and total mystery. In his last book he goes to great pains to marvel at seemingly impossible "risk adjusted rates of return" throughout a variety of markets, but concludes that in the case of housing it's still "froth" and not a bubble. Since the bubble hadn't become obvious at the time of the book's publication, what else would he say? But more practically, we should all realize that if housing prices had dipped about 1-2% less than they did, most of the damage would not have occurred. Our institutions (banks, etc.) were calibrated to handle some amount of systemic risk, but not as much as it turned out they should have. Hindsight is 20/20 and Burry may have been extra prescient, but like any bettor he could have been wrong. Since he had no additional information than the rest of the market, we can conclude that the rest were all sheep (or idiots) or that there was actually some -- gasp -- chance going on. The difference is that the majority of people, institutions, etc., misjudged just how much calamity would be caused by price deviations that they calculated to be highly improbable.

anamax 17y ago
> Notably he did speak up about Fannie and Freddie in the early 2000s but was silenced by the GOP's drive to make war Wrong. Fannie and Freddie were protected by Dems, not Repubs. Mccain got his teeth kicked in over this one. Interestingly enough, Fannie and Freddie execs during that time were largely Dems, most of whom who landed in the Obama administration. While at Fannie and Freddie, they took out millions. Oh, and during this time, Fannie and Freddie were lying about the mortages in their portfolios, which threw off everyone's risk evaluation. (Their portfolios contained far more subprime than they admitted to.) If Fannie and Freddie weren't politically connected GSEs, folks would be in jail.
- grandalf 17y ago
  Everything you say is accurate except the insinuation that Democrats are mostly at fault. George W. Bush was in office for the worst of it, and he spent his political capital trying to convince people that a war was necessary. He spent 99% of his political capital on war and at best 1% on everything else. He was far from powerless, having control of both houses of congress. The fact is he was perfectly fine with the GSEs being someone else's problem so nobody would get distracted away from the "war". Incidentally the GSEs were taken off government books in order to make the budget look better so we could "afford" the Vietnam war.
  - anamax 17y ago
    > Everything you say is accurate except the insinuation that Democrats are mostly at fault. George W. Bush was in office for the worst of it In this matter, Bush's sins are sins of omission - as you point out, he didn't do anything. Dems did something, but what they did was wrong. For example, they actively protected Fannie and Freddie. Those are sins of comission. Note that Bush didn't change the regulatory structure - he went with what Clinton left him. Again - omission vs comission. It's the difference between manslaughter and murder. And, that's ignoring ACORN's role. Among other things, they picketed banks that didn't make enough loans to folks who couldn't afford them. They tried to intervene with regulators. And so on. Yes, Bush might have been able to keep this from happening, but he would have been fighting Dems the whole way. He didn't fight. They pushed bad policies. There is a difference. And, I note that Barney Frank is still in office and Gorelick, among others, are in the Obama administration. Bush? Not in office.
    - btilly 17y ago
      There is plenty of blame to go around, but one of the biggest mistakes leading up to the financial crisis was significantly lowering the amount of cash reserves the investment banks needed to keep on hand. That happened on Bush's watch with Republicans in charge of every branch of government. And the revoking of Glass-Steagall under Clinton? That was introduced by Republicans in both the House and Senate, with the Senate vote being almost entirely on party lines. Yes, Clinton signed it, but it was a Republican bill.

anamax 17y ago

> Notably he did speak up about Fannie and Freddie in the early 2000s but was silenced by the GOP's drive to make war Wrong. Fannie and Freddie were protected by Dems, not Repubs. Mccain got his teeth kicked in over this one. Interestingly enough, Fannie and Freddie execs during that time were largely Dems, most of whom who landed in the Obama administration. While at Fannie and Freddie, they took out millions. Oh, and during this time, Fannie and Freddie were lying about the mortages in their portfolios, which threw off everyone's risk evaluation. (Their portfolios contained far more subprime than they admitted to.) If Fannie and Freddie weren't politically connected GSEs, folks would be in jail.

grandalf 17y ago
Everything you say is accurate except the insinuation that Democrats are mostly at fault. George W. Bush was in office for the worst of it, and he spent his political capital trying to convince people that a war was necessary. He spent 99% of his political capital on war and at best 1% on everything else. He was far from powerless, having control of both houses of congress. The fact is he was perfectly fine with the GSEs being someone else's problem so nobody would get distracted away from the "war". Incidentally the GSEs were taken off government books in order to make the budget look better so we could "afford" the Vietnam war.
- anamax 17y ago
  > Everything you say is accurate except the insinuation that Democrats are mostly at fault. George W. Bush was in office for the worst of it In this matter, Bush's sins are sins of omission - as you point out, he didn't do anything. Dems did something, but what they did was wrong. For example, they actively protected Fannie and Freddie. Those are sins of comission. Note that Bush didn't change the regulatory structure - he went with what Clinton left him. Again - omission vs comission. It's the difference between manslaughter and murder. And, that's ignoring ACORN's role. Among other things, they picketed banks that didn't make enough loans to folks who couldn't afford them. They tried to intervene with regulators. And so on. Yes, Bush might have been able to keep this from happening, but he would have been fighting Dems the whole way. He didn't fight. They pushed bad policies. There is a difference. And, I note that Barney Frank is still in office and Gorelick, among others, are in the Obama administration. Bush? Not in office.
  - btilly 17y ago
    There is plenty of blame to go around, but one of the biggest mistakes leading up to the financial crisis was significantly lowering the amount of cash reserves the investment banks needed to keep on hand. That happened on Bush's watch with Republicans in charge of every branch of government. And the revoking of Glass-Steagall under Clinton? That was introduced by Republicans in both the House and Senate, with the Senate vote being almost entirely on party lines. Yes, Clinton signed it, but it was a Republican bill.