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Greenspan Recants

October 24, 2008

Former Federal Reserve Chairman Allen Greenspan said the following in a statement yesterday to the House Committee on Oversight and Government Reform:

[T]hose of us who have looked to the self-interest of lending institutions [aka self-regulation—ed.] to protect shareholder’s equity (myself especially) are in a state of shocked disbelief. Such counterparty surveillance is a central pillar of our financial markets’ state of balance. If it fails, as occurred this year, market stability is undermined.

Then this happened, as reported in the New York Times:

“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,” said Representative Henry A. Waxman of California, chairman of the committee. “Do you feel that your ideology pushed you to make decisions that you wish you had not made?”

Mr. Greenspan conceded: “Yes, I’ve found a flaw. I don’t know how significant or permanent it is. But I’ve been very distressed by that fact.”

And:

Mr. Waxman noted that the Fed chairman had been one of the nation’s leading voices for deregulation, displaying past statements in which Mr. Greenspan had argued that government regulators were no better than markets at imposing discipline.

“Were you wrong?” Mr. Waxman asked.

“Partially,” the former Fed chairman reluctantly answered, before trying to parse his concession as thinly as possible.

OK. Moving forward. John McCain told the Wall Street Journal the following this past March:

I’m always for less regulation. But I am aware of the view that there is a need for government oversight. … But I am a fundamentally a deregulator. I’d like to see a lot of the unnecessary government regulations eliminated.

And then he said this in a speech on March 25th:

In financial institutions, there is no substitute for adequate capital to serve as a buffer against losses. Our financial market approach should include encouraging increased capital in financial institutions by removing regulatory, accounting and tax impediments to raising capital.

“Removing” regulatory impediments. Got that? Removing.

Meanwhile, Barack Obama said the following in his speech at the Democratic National Convention on August 28th:

And it is on their behalf that I intend to win this election and keep our promise alive as President of the United States.

What is that promise?

It’s a promise that says each of us has the freedom to make of our own lives what we will, but that we also have the obligation to treat each other with dignity and respect.

It’s a promise that says the market should reward drive and innovation and generate growth, but that businesses should live up to their responsibilities to create American jobs, look out for American workers, and play by the rules of the road.

Ours is a promise that says government cannot solve all our problems, but what it should do is that which we cannot do for ourselves – protect us from harm and provide every child a decent education; keep our water clean and our toys safe; invest in new schools and new roads and new science and technology.

Our government should work for us, not against us. It should help us, not hurt us. It should ensure opportunity not just for those with the most money and influence, but for every American who’s willing to work.

Keep in mind that these statements by Obama and McCain were all made before the Dow blew up.

In summary:

Greenspan, former acolyte of deregulation, “partially” renounces his ideology; McCain “is fundamentally a deregulator”—While Obama says that American business “should … play by the rules of the road” and that “government … should do … that which we cannot do for ourselves.” One of those things being: Regulate the financial institutions who have dragged the U.S. public into this current mess.

So who you gonna vote for?

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