CEPR - Center for Economic and Policy Research


En Español

Em Português

Other Languages

Home Publications Blogs Beat the Press Yes, Alan Greenspan Owes Us a Really Big Apology

Yes, Alan Greenspan Owes Us a Really Big Apology

Thursday, 31 October 2013 18:15

I try not to use BTP to carry on personal exchanges, but I can't resist this one. I see that Nick Gwiazda takes issue with me in the International Business Times arguing that Alan Greenspan does not owe the United States and the world an apology for allowing the housing bubble to grow large enough that its collapse would destroy the economy.

Apparently, Mr. Gwiazda thinks that I am Monday morning quarterbacking on this one. That is 180 degrees at odds with reality. I was warning about the bubble from the summer of 2002 and yelling at the top of my lungs. I was also telling Alan Greenspan what he should do about it. Here's a brief summary from a few weeks back.

The point here is that Greenspan had no excuse. It was easy to see the bubble for anyone with open eyes and easy to see that its inevitable collapse would be a disaster for the economy.

As an economist I think that we have to reward workers when they do their jobs well and sanction them when they perform poorly. Few workers have ever performed their job more poorly than Alan Greenspan. He indeed owes us a big apology and should stop wasting our time by trying to tell us that the dog ate his homework.

Comments (12)Add Comment
Gwiazda gives apologists a bad name
written by PeakVT, October 31, 2013 7:10
When a man spends 40 years of his life surrounding himself with economic data, he has credibility.

Somebody should be very embarrassed by that sentence.
I could see the housing bubble
written by Mark Brucker, October 31, 2013 7:16
Not as early as DB, but before it crashed. And I ain't no economist. But to sort of do a take off on the Holiday Inn ads, I read smart people like DB and Krugman and DeLong so I do have an idea what's really going on! And so I can laugh at Robert Samuelson and his tortured attempts to redefine reality!
Gwiazda gives name calling a bad name
written by JaaaaayCeeeee, October 31, 2013 9:08

Gwiazda thinks that a 2007 nyt interview in which Greenspan obsfucates and blame-shifts, somehow proves Greenspan did his job well.

We're not in good shape, when business news media relies upon lying lickspittles calling Dean Baker bothersome, ignorant, egotistical, insulting, not reputable, and only an "economist" (feel the air quotes).

For very important, not-at-all-personal reasons, the reality based economy needed your response on record.
Greenspan Will Go Down in History as the Great Maker Who Became the Great Taker
written by Last Mover, November 01, 2013 5:54

Greenspan revealed his true sociopathic nature when he asserted the financial crash was "worth it" as an acceptable risk of capitalism, something he claimed would not be expected more than once in a hundred years.

How convenient. It happened 80 years after the 1929 Great Depression to justify his perspective retroactively a little early. The good news is it won't happen again for 120 years as long as people like Greenspan keep building economic levees designed to withstand once-in-a-century floods of severe recession and depression.

Greenspan continues to apply this rationale to the entire destructive swath of the subsequent Great Recession as he digs even deeper the hole of discredibility and dishonesty that bury him.

With bizarre predictions and recommendations on how to get out of it, he cherry picks strange comparisons of data, forcing them into an economy that work like the one he oversaw during the Great Moderation as the maestro who so wisely left it to its own self correcting mechanisms ... to finally explode from the "normal" systemic risk to be expected according to Greenspan.

For Gwiazda to characterize Dean Baker's criticism of Greenspan as Monday morning quarterbacking is an ultimate condemnation of Greenspan himself and the kind of capitalism he embraces.

It condones the kind of free markets that hold no one responsible for the outcome no matter the economic damage. The kind of free markets where the discipline of competition is crushed into oblivion in the name of keeping government out of them, the kind of free markets that produce takers who call themselves makers and keep getting away with it.

The Great Recession did not happen overnight. The build up was strung out over Greenspan's watch over the economy. Evidence of the housing bubble started appearing in the late '90s and eventually grew to the economic elephant in the room by mid-2000.

Yet Greenspan was still mumbling away before the microphones, happily enabling the coming destruction by refusing to influence it with the one voice that mattered, choosing instead to let run free the market ideology he so blindly embraced at any cost.
written by Chris E., November 01, 2013 8:17
It's more than just "letting the housing bubble continue" -- it's the whole Fed culture he fostered as an Ayn Rand disciple. It poisoned the whole system from the top down.

Unlike wealth and income, a toxic organizational culture really does trickle down.
I'm with Mark Brucker
written by rationalrevolution, November 01, 2013 8:41
By 2005 the housing bubble was obvious. Now I did live in Ft Lauderdale in 2005, one of the places where the bubble was at its worst, but still. From 2005 to 2006 my friends and I would sit at the bar and talk about the housing bubble and how it was going to implode and bring down the economy, etc.

The funny thing was that one of our friends is a conservative guy who works in the finance industry. He was a big Bush supporter, while most of the rest of us are pretty progressive and were anti-Bush.

He was ADAMANT that there was no housing bubble and that we were all on crack. And he had an MBA and an econ degree and worked for, some financial planning company, I forget which.

None of us had econ backgrounds, but we were bringing up pretty basic points. Namely we talked about the price of homes relative to incomes, which made it clear that incomes weren't going up, so it made no sense that the price of homes would be able to rise that much, and the cost of renting vs owning was hugely out of whack.

But he dismissed all of that. Of course we didn't know the details of what was going wrong, much of which I've subsequently learned, but we didn't have to know exactly how and why it was happening, it was just clear that ti was.

In fact it was SO clear that my girlfriend at the time sold her house in 2006, which she had just bought in 2003, for over $100,000 in profits and said that the housing prices were too high, she wanted to sell hers at the top and she'd rent for a year or two and then buy again when they came down, which is exactly what we ended up doing, selling in 2006 and buying in 2009.

And she worked in HR.

So you're telling me that just some regular girl working in HR, and me and some guys at the bar had it all figured out, but Alan Greenspan didn't have a clue?

Actually I believe that. I believe that Greenspan's understanding of economics is so biased and skewed that he truly doesn't know his ass from a hole in the ground.
written by skeptonomist, November 01, 2013 9:31
The contrast in attitudes toward Greenspan and Bernanke is quite remarkable. Although Greenspan at one time (before about 2000) was regarded even by liberal economists (e.g. Krugman and DeLong) as the true Maestro, now he is a complete idiot. But Bernanke had almost the exact same attitude towards the housing bubble; he explicitly denied its existence and anyway maintained that it isn't the Fed's job to control bubbles unless they directly affect inflation:


Why are Bernanke's opinions still taken seriously? Not only was he completely wrong about the bubble, his claims that the Fed has the power to control the economy fell far short of reality. The claims of conservatives that the Fed must immediately raise interest rates to combat nonexistent inflation are themselves nonsensical, but this is not evidence that Bernanke or anyone else knows how to control the economy or even bubbles through monetary manipulations (Dean's claims about how bubbles can be harmlessly deflated by the mere word of the Maestro are completely speculative).

Greenspan - and Bernanke - are still taken seriously in part because there is a general inflated attitude toward the importance of monetary policy and the knowledge of economists thereof. Of course there is also a general reverence toward authority figures and at the moment that is Bernanke. Former authority figures are often vilified if bad things happened during their tenure.
written by liberal, November 01, 2013 9:49
Apologize? The man has ruined untold lives. The fact he hasn't committed ritualized suicide is an embarassment, frankly.
Legal researcher
written by C Silver, November 01, 2013 10:26
Not so many years ago, Greenspan described Enron as a company whose monopolization of energy generation and hiking the costs of future energy delivery contributed nothing to the economy. While Greenspan almost paraphrased the description of inflation from Econ101, he was describing the practices of most of the financial services industry. While the Enron formula was a new spin on controlling capacity, demand, and cost over time, Goldman Sachs applied Enron's formula by offering OPEC a deal to double the price per barrel if GS could act as agent. The result: GS pocketed the difference between the doubled $40 per barrel price and the $100 plus price they exacted.
As for the real estate bubble, the sub-prime entrapment scheme designed to shackle speculators to deficiency-judgment-debt didn't work. Even the Ashcroft / Gonzales spate of neocon judicial appointments couldn't hold entrapped buyers to debt-load beyond a lifetime of earning capacity. Thus began the housing implosion and to blame Greenspan for such a complex pump and trap grand scheme hands him credit for the kind of thinking that could only come from a group of Harvard regents sitting on the boards of Wall Street FSBs. The housing bubble was either the perfect storm of opportunity for financial corruption or a plan that involved the courts, enforcement, banking, sociologists, and speculators working across years of planning that failed because the greediest broke ranks. To blame Greenspan is to hand way too much IQ to a man showing signs of senility when Enron was taking the media center stage.
bernanke didn't fail in the ways you claim
written by JaaaaayCeeeee, November 01, 2013 10:41
Skeptonomist, Bernanke said in 2005 that he didn't think housing prices would keep rising (better error than many), and despite massive pressure to increase interest rates in 2006, he didn't, because he suspected the economy was weakening.

Despite your claims to the contrary, Bernanke not only had the power to control the economy, but was probably the only FED chairman with the intellectual chops and legitimacy to mitigate the 2008 crash.

You could make a great claim we needed a more regulating Bernanke, but you don't. Bernanke was no Greenspan.
My money where Baker's mouth was
written by Andrew Hoerner, November 02, 2013 2:18
I offer a particulary vivid proof that Dean's consistant line on the housing bubble was available and persuasive: It perrsuaded me to sell my house in DC in 2006. As a direct result, I may be able to retire one of these days, as this sale trippled my savings with one transaction. If I had not been reading Dean's columns I would surely still have been holding that house when the DC property values crashed.

If I could read them, why couldn't Greenspan?
Not much to ask.
written by Jeremy, November 02, 2013 8:24
An apology is not much to ask for. I'm actually surprised he hasn't apologized already. Everything was happening right under his nose.

Write comment

(Only one link allowed per comment)

This content has been locked. You can no longer post any comments.


Support this blog, donate
Combined Federal Campaign #79613

About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.