I have long maintained that Greenspan was a key mover of the ideology that has resulted in this fiscal crisis and until this past week seemed to be let off the hook. He now admits he was wrong. Certainly, this is a time when the normal human emotional reaction is to find scapegoats, most of it under the guise of finding out 'what went wrong.'
Yet we would be foolish to let Congress off the hook here. The buck stops with them. They, with some exceptions, were responsible for the excesses of Fannie and Freddie because they failed to act when warned. It's clear that former leaders of Fannie (Franklin Raines and others) were crooks. And this administration clearly supported a climate of less regulation.
Nevertheless, if I were at a different point in life, I would be buying value stocks for the long run. The U.S. and world economies will ultimately rebound after this shakeout.
"But on Thursday, almost three years after stepping down as chairman of the Federal Reserve, a humbled Mr. Greenspan admitted that he had put too much faith in the self-correcting power of free markets and had failed to anticipate the self-destructive power of wanton mortgage lending.
“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,” he told the House Committee on Oversight and Government Reform.
Now 82, Mr. Greenspan came in for one of the harshest grillings of his life, as Democratic lawmakers asked him time and again whether he had been wrong, why he had been wrong and whether he was sorry."
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