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PRESS RELEASE


Greenspan Humiliated—It's a Start

April 8, 2010 (EIRNS)—Former Federal Reserve chairman Alan Greenspan, now a senior economic advisor to British Prime Minister Gordon Brown, was reduced to defending his treasonous Fed record with "Well, I was right some of the time," in his appearance before the U.S. Congress' Financial Crisis Inquiry Commission April 7. Greenspan was sharply attacked, and his responsibility for the world economy's debt-bubble crash exposed, by Commission member Brooksley Born, the Clinton Administration's chair of the Commodities Futures Trading Commission (CFTC). He also, pathetically, tried to blame Congress for all his failed economic forecasts and criminal bubble-policies, claiming he was only implementing the laws Congress passed concerning the Fed!

Born had probably been waiting 15 years for this chance, and Greenspan came off much the worse for wear after her attack. In 1995-96, Greenspan was the leader of a "Gang of 3" (with Larry Summers and Robert Rubin) who threatened and blocked Born's move to regulate and limit so-called financial derivatives, the quadrillion dollars worth of poison that brought on history's worst global crash ten years later.

Lyndon LaRouche called Born's undoing of Greenspan "a headline; they've got to take this guy down—among others, but he needs to go down." Most "critics" of Greenspan whine and diddle about his interest-rate policies at the Fed after 2000; LaRouche has nailed him, ever since the 1987 crash, as the intentional creator of bigger and bigger financial derivatives bubbles, eventually to destroy the world economy. Born took the same line of attack, going for Greenspan's throat.

"You championed so-called over-the-counter (OTC) derivatives," Born lunged, "you pressed for them not to be regulated; you championed the Financial Commodities Modernization Act of 2000; the OTC derivatives grew to nominal value of $700 trillion by 2006. In your view, did OTC derivatives, including credit default swaps, play a role in the financial collapse?"

Greenspan had to admit they had, but "Oh, credit default swaps [CDS] were initially a very small fraction." Sure, CDS created big problems, said the big man, but "I wasn't talking about CDS" in the 1990s and early 2000s—the period when he claimed derivatives, not government regulators, should regulate all the markets.

Born sharply corrected Greenspan with the figures: The CDS "small fraction had risen to a notional value of $60 trillion by 2008, more than the entire world's total GDP. "Are you aware that AIG's failure and bailout was due to its CDS exposure, causing $180 billion cost to U.S. taxpayers?" she asked. Born added that derivatives regulation (her intention) had been blocked by "the President's Working Group's actions up to 2000." Greenspan effectively ran that body.

Greenspan then began babbling nonsense: "Derivatives were not a big factor in anything. With respect to AIG, it is correct that [it] was a proximate cause. But they could have gotten in just as much trouble selling insurance"—some in the hearing room laughed at this attempt.

Born then went right for the jugular of Greenspan's bizarre Ayn Randist ideology: "Your book identifies you as a libertarian outlier, against almost all forms of regulation; you believe government regulation of markets is unnecessary or harmful. Now you say you've 'found a flaw' in that ideology. You were Fed chairman for 18 years, 'the most respected sage on the financial markets in the world.' Did your ideology have an impact on oversight of markets, here and worldwide?... The Fed utterly failed to prevent any of the activities which caused the collapse. You failed to prevent many of our banks from growing into gigantic institutions too big and to interconnected to fail. Didn't the Fed fail to meet its responsibilities?"

That's when Greenspan admitted that he had "allowed the entire financial system to be undercapitalized and overleveraged" with debt. He might as well have admitted he had injected it with Ebola virus. But, not his fault! "Everyone else in government, in the private sector, in academia," he claimed, shared the same ideology. To Born, Greenspan concluded, in his only nod to the truth, "I really fundamentally disagree with your point of view."

Note that it was Greenspan, as Gordon Brown's advisor, who reportedly devised the disastrous British "global bail-out plan" which British puppet Barack Obama helped Brown put through at the G-8 financial summit of February 2009.