Humble Pie Chart

This is from a fantastic and hilarious site, Bubblewrapped, that we just discovered. It bills itself as offering “Financial tools, objective analysis and mixed metaphors to help you stay afloat in the crash.” Besides Greenspan, this “humble pie chart” mostly skewers journalists from the British business press, including, alas, Anatole Kaletsky (sorry, Larry…).

Alan Greenspan

Chairman of the US Federal Reserve, 1987-2006; knighted by the Queen in 2002 for his “contribution to global economic stability”

Before

2003
“What we have found over the years in the marketplace is that derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn’t be taking it to those who are willing to and are capable of doing so. We think it would be a mistake [to more deeply regulate the contracts].”

2004
“Not only have individual financial institutions become less vulnerable to shocks from underlying risk factors, but also the financial system as a whole has become more resilient.”

2007
“I was aware that the loosening of mortgage credit terms for subprime borrowers increased financial risk … But I believed then, as now, that the benefits of broadened home ownership are worth the risk.”

“It seems superfluous to constrain trading in some of the newer derivatives and other innovative financial contracts of the past decade. The worst have failed; investors no longer fund them and are not likely to in the future.”

After

2008
US Congress hearing, 23 October 2008

REPRESENTATIVE HENRY WAXMAN: [Mr Greenspan, you said:] “I do have an ideology. My judgment is that free, competitive markets are by far the unrivaled way to organize economies. We’ve tried regulation. None meaningfully worked.” That was your quote.

You had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others. And now our whole economy is paying its price.

Do you feel that your ideology pushed you to make decisions that you wish you had not made?

GREENSPAN: Well, remember that what an ideology is, is a conceptual framework with the way people deal with reality. Everyone has one. You have to – to exist, you need an ideology. The question is whether it is accurate or not.

And what I’m saying to you is, yes, I found a flaw. I don’t know how significant or permanent it is, but I’ve been very distressed by that fact.

WAXMAN: You found a flaw in the reality …

GREENSPAN: Flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.

WAXMAN: In other words, you found that your view of the world, your ideology, was not right, it was not working?

GREENSPAN: That is … precisely the reason I was shocked, because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.

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