For Immediate Release
WASHINGTON - The lead piece in the Washington Post today is "Greenspan Says he was Wrong on Regulation." (The piece is critiqued by economist Dean Baker, who continuously warned of the ramifications of the housing bubble since early in this decade.
Professor of public affairs at the University of Texas at Austin, Auerbach wrote the new book Deception and Abuse at the Fed: Henry B. Gonzalez Battles Alan Greenspan's Bank.
Auerbach was an economist with the House Committee on Financial
Services including during a period when Texas Congressman Gonzalez
attempted to achieve a level of meaningful oversight over the Fed.
Gonzalez was continuously thwarted by Greenspan.
Auerbach said today: "Yesterday, Alan Greenspan's testimony contained
the same type of dodges that the master of garblements had displayed in
the 1990s when he achieved saint-like status as leader of the Federal
Reserve. Greenspan's response to questions about the causes of the
current economic crisis included the unreliability of predictions and
the failure to regulate one particular financial derivative. That
narrowing of causes hides his dismal record on regulation.
"Greenspan had already been through a financial crisis and should have
known exactly why better regulation was needed. Greenspan fought House
Financial Services Chairman Henry B. Gonzalez, who pushed for needed
regulation that was plainly illustrated after the savings and
loan/banking crisis that ended in the early 1990s.
"The Clinton administration called for a rational bank regulatory
system by consolidating the bank regulators into one agency. Greenspan
railed against the idea and talked about the need for 'hands-on
regulation' by the Fed. Gonzalez replied that Greenspan failed to tell
us where the Fed really has its hands and that the only hands that
should be on Federal Bank regulation are those of a neutral bank
regulator. Since two-thirds of the nine directors at each of the twelve
Federal Reserve Banks are elected by the banks in their district, there
are profound conflicts of interest with bankers regulating themselves.
"In his 2007 book, The Age of Turbulence, Greenspan changed
his mind and said that 'hands-on supervision and regulation' is 'being
swamped.' That was last year when he wrote 'We have no sensible choice
other than to let markets work.' Yesterday he testified he was wrong
about his hands-off regulatory philosophy. The 2007 hands-off
regulatory philosophy was a change from his previous hands-on
regulatory stance. This is not philosophy. It is the 'master of
garblements,' the title of Chapter 3 in my book Deception and Abuse at the Fed: Henry B. Gonzalez Battles Alan Greenspan's Bank."