Greenspan
Passes the Buck
People
are mad at Greenspan. Yes, the
Lord of the Stock Market, the One True God we worshiped, has failed us, we see. Alan Greenspan, almost three years
after retiring as chair of the Federal Reserve, is realizing that free markets
don't always self-correct. Last
Thursday he told the House Committee on Oversight and Government Reform, "Those
of us who have looked to the self interest of lending institutions to protect
shareholders' equity, myself included, are in a state of shocked
disbelief." (NY Times 10/23)
Lawmakers
asked him to say, "I was wrong, and I'm sorry." Pretty simple.
But Greenspan declined. At
a time when unprecedented numbers of people all over the nation are losing
homes and now losing jobs, as well, the former Chair refused to accept
responsibility for the crisis. He
did say, however, that his faith in deregulation has been shaken. We were hoping you might have noticed
sooner, Mr. Greenspan. And since
you have fiercely opposed deregulation for almost 15 years, one would hope that
you would at least apologize for letting ideology rather than market realities
determine our economic policy.
"The whole intellectual edifice . . . collapsed in the summer of last
year," he said.
This
kind of real-world crash is what happens when leaders hold to a blind faith in
abstract notions of how things work, to the exclusion of what is happening to
real people in real time. (Another
good example of the dominance of ideology over common sense and the lessons of
history is President Bush's belief that the war in Iraq would be quick and
easy, and we would be "greeted as liberators.")
Did
Alan Greenspan really believe that people would fail to act in their own
(short-term) self-interest in a culture in which that is the absolute name of
the game? Did he think that most
bankers would fail to sell mortgages to people, if these bankers had no risk of
losing money and had every reason to gain? Did he think that ordinary people who had always wanted a
home but thought they might not ever be able to afford one would turn down a
loan that was handed to them so readily?
Did he think that speculators would not try to speculate, when easy
money is available? I am not an
economist--my field of study is theology.
But I could have told Mr. Greenspan, had he asked, that people do tend
to act in their own self-interest most all of the time, even if their actions
might very well hurt others--yes, even if their actions stand to cause massive
social dislocation and the suffering of many.
This
is how it works, Mr. Greenspan.
With sin, I mean. First you
decide what you want to do, out of your own need, or greed. Then you rationalize that this action
is not harmful to others--in fact, it probably will even benefit others
(consider the totally discredited "trickle-down theory"). Then you ignore the consequences of
your behavior, when they don't match your rationale. When it turns out that your chosen ignorance and your greed
have harmed another (or many), you say, "Gee, I just didn't know!"
Greenspan
blamed our troubles on "the modern risk-management paradigm." Theologians might use the word
"concupiscence," meaning lust or greed.
Maybe you economists should consider lacing your curricula of
mathematics and logic with a little study in ethics and theology. You could even consider meditation and
prayer, to attempt an engagement of the heart.
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