Greenspan being quite remarkable!
Fingers crossed this becomes a key political statement.
I am indebted to Baseline Scenario for drawing my attention to a recent article in Bloomberg. Greenspan is voicing what many regard as so obvious we wonder why the present US Government haven’t been pushing for this for some time. (And if you want the answer to that question, read this)
Anyway, in the Bloomberg story Greenspan says:
“If they’re too big to fail, they’re too big,” Greenspan said today. “In 1911 we broke up Standard Oil — so what happened? The individual parts became more valuable than the whole. Maybe that’s what we need to do.”
Breathtaking!
And Greenspan goes on to say:
“Failure is an integral part, a necessary part of a market system,” he said. “If you start focusing on those
who should be shrinking, it undermines growing standards of living and can even bring them down.”
Amen to that!
By Paul Handover
Paul Handover
Speaking as a layman, I thought that the whole philosophy behind “capitalism”, especially the American version, was competition, which ultimately means – as in Nature (is this a coincidence?) that the weakest do not survive. Indeed, it has often been said – and I thought was a truism – that failure is essential to success and that, for example, American business is so strong because most entrepreneurs expect to and do fail at first but that this does not deter them from learning from mistakes and trying again.
Well, the financial crisis turned all this on its head; the blatant failure of many banks was due to their own reckless lending based – let us be clear – on institutionalised greed and the idiotic jettisoning of traditional banking prudence and practice.
But then these banks were said to be “too big to fail”, AIG being the prime example. They were then rescued by the taxpayer and many are now back to their vast profits and obscene bonuses thanks to the working man.
For me there is no sign whatsoever that any real “lessons have been learned” by the top bankers except that they won’t be allowed to fail and that most of them will keep their jobs. Meanwhile, in the real world circumstances for ordinary people continue to be very, very difficult with many losing their homes due to foreclosures by the very banks that caused this problem in the first place. As far as I know, power without responsibility has always lead to catastrophe.
The bottom line is (an expression loved by American financiers) if it fails then it doesn’t deserve to succeed and saving it will cost more in the long term. This philosophy made the US the richest and most powerful nation in the world; strange to see it ditched so precipitously. Still, there is a silver lining, the banking elite and their bonuses survive as they are “too big to fail”.
Well, Greenspan is right, but unfortunately his credibility for me pretty much zero since he complacently presided over the shoddy banking practices that lead up to this fiasco.
Chris SNUGGS
October 20, 2009 at 10:53