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Dean Baker notices that Alan Greenspan is still being consulted as the wise man of all matters economic. It's a bit odd given that the systemic rot in the financial sector developed on Greenspan's watch, and was worsened by his refusal to heed the advice of subordinates and begin regulating the subprime and mortgage markets. From The Wall Street Journal:
Mr. Greenspan blocked a proposal to increase scrutiny of subprime lenders under the Fed's broad authority. That added scrutiny might have helped curtail questionable lending practices now blamed for soaring defaults by mostly low-income borrowers. Democrats in Congress are now turning up the heat on regulators, especially the Fed, for failing to do more to stamp out those practices, and the Fed appears increasingly likely to overhaul its approach.Edward Gramlich, who was Fed governor from 1997 to 2005, said he proposed to Mr. Greenspan in or around 2000, when predatory lending was a growing concern, that the Fed use its discretionary authority to send examiners into the offices of consumer-finance lenders that were units of Fed-regulated bank holding companies."I would have liked the Fed to be a leader" in cracking down on predatory lending, Mr. Gramlich, now a scholar at the Urban Institute, said in an interview this past week. Knowing it would be controversial with Mr. Greenspan, whose deregulatory philosophy is well known, Mr. Gramlich broached it to him personally rather than take it to the full board."He was opposed to it, so I didn't really pursue it," says Mr. Gramlich, a Democrat who was one of seven Fed governors.Of course, poor Ben Bernanke got stuck managing the crisis, while Greenspan got to exult in the good vibes and warm feelings of the bubble, and, having exited stage left moments before the good times ended, now gets to play the sage as the financial sector collapses in on himself. Say what you will about Old Alan, but the guy's got an exquisite sense of timing...
