Thursday, October 23, 2008

Greenspan: "I made a mistake"

Wow:

“I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms,” Mr. Greenspan said.
New York Times article

5 comments:

Kizz said...

One presumes that this mistake was made post-Enron when it was painfully clear to (I hope) everyone that organizations aren't capable of any of that at all! Does willfully ignoring a fact still qualify as a mistake?

YoungMoneyTalks said...

Wow squared.

Optioned Unarmed said...

I think that part of the "best interest" assumption assumes that companies and financial institutions are integrated organisms whose ultimate life and future are as important to the institution itself as the life and future of an individual living breathing human being is to himself. But in fact, companies (including financial institutions) are not integrated organisms at all, and their aggregate behavior cannot be compared to that of a living breathing person/organism. For example, the decisionmakers and workers in a company do not "die" if the company fails....

It seems that the "best interest" of those at the top of our financial institutions has been making money for themselves without regard for the overall health or longevity of the actual institution. Instead it has become "take all you can before the ship goes down" while they take actions that will inevitable cause the ship to sink.

I am glad that Greenspan fessed up to being wrong. Relatedly, Naomi Klein did a great speech recently at the University of Chicago where she argued that the recent finanial crisis is proof that Thomas Friedman's theories on unregulated free market capitalism were flawed. (Specifically she said: "the crash on Wall Street, I believe, should be for Friedmanism what the fall of the Berlin Wall was for authoritarian communism")

Here is a link to Naomi Klein's speech in case anyone is interested. Has some interesting thoughts/observations on economic theory:
http://www.youtube.com/watch?v=dKsfrTrVqow
OR
http://www.democracynow.org/2008/10/6/naomi_klein

Sicilian said...

Great article. . . .I wonder how people can trust any person who argues the self regulation concept vs having some entity doing oversight. . . . I don't know about the rest of the US, but I'm thinking we left the Fox in the Chicken Coop to long. . . .
Ciao

Optioned Unarmed said...

Oops, "Milton Friedman", not "Thomas Friedman". Doh!