Thursday, March 12, 2009
Alan Greenspan on the Defense in the WSJ
Yesterday in the journal Alan Greenspan pleaded his case for why we should not blame federal reserve policy for the big fat mess we are in. He argues that the fed does not control long term rates, and therefore mortgage rates, so really it was not in his zone to stop all this craziness. He states that the "Federal Reserve became acutely aware of the disconnect between monetary policy and mortgage rates ......." And???? And??? How about "and so we went on the offensive talking about the potential issues because of our important role as leaders and major players in the financial system who are suppose to have the public interest as our core mission." I am not solely blaming them but they did not take appropriate action to make sure that massive and inappropriate leverage did not build up in the system causing what we are now experiencing. Just because it was not their sole and whole job does not mean it was not their job to do more. It is this siloed thinking that is responsbile for this financial, economic and now social global crisis. Leadership. Good leadership is both seeing the potential problems and taking responsibility for solutions, even if it might not be entirely your job to do so. Expanding on that it is about seeing the interconnectedness of it all, and then acting upon it. I do like how this piece ends and I agree with the solutions he is now offering. He warns of overregulation but does believe that "our challenge in the months ahead will be to install a regulatory regime that will ensure responsible risk management on the part of financial institutions, while encourageing them to continue taking the risks necessary and inherent in any successful market economy." I would add another call - let's expect more of all our leaders and hold them more accountable for the bigger picture. Also, for the record Mr. Greenspan, you did keep rates too low for too long.