Greenspan: Faith in Markets was a "Mistake"

Former Federal Reserve Chairman Alan Greenspan, a guiding force in the deregulation of financial markets, has conceded his faith in laissez-faire economics was a "mistake," according to The New York Times. Appearing before the House Committee of Government Oversight to discuss the specific policies that helped lead up to the current market meltdown—Greenspan's 18-year-tenure ended in 2006—the former Fed Chairman offered an especially candid mea culpa. 

"I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms," Greenspan was quoted. Asked by Rep. Henry Waxman (D-CA) whether this amounted to a realization that "your view of the world, your ideology, was not right, it was not working," Greenspan replied "Absolutely, precisely."

As the Times points out, Greenspan has come under fire for his failure to regulate the market for credit-default swaps, a sort of credit insurance issued by banks that helped lay a shaky foundation for the current economy. Given the current financial climate, it would have been nearly impossible for Greenspan not to shoulder some of the blame. But who knew an entire economic worldview, like the economy, would collapse under its weight?

Comments

[Joy]

Even if he made this remark, it's too late, people are losing jobs and homes.

[Hank Roberts]

Question -- I've been worrying about an old friend who bought recently and was in a bind. He went with a mortgage broker early this year "locked them in" at 5.25% fixed, but a month or more later told them the lender had been unwilling to actually fund the loan -- something about the broker not using a system that guarantees a commitment electronically but relying on an older paper system that isn't final until paperwork clears.

Does this make any sense? Can you explain what a naive borrower needs to do to know they actually have a loan for sure, and can this be certain before ink goes on paper?

[Mike Clover]

More than likley the system they are talking about is either Loan Propector or Desk Top Originator. These are underwriting engines that lenders use for determining an approval These engines are were developed by Freddie Mac and Fannie Mae to determine whether or not they will buy a loan or not.This software just recently changed which more than likley caused the denial.

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