In testimony before the Financial Crisis Inquiry Commission, former Federal Reserve Chairman Alan Greenspan defended his record during questions by Chairman Phil Angelides by saying he was "right 70 percent" and "wrong 30 percent" of the time.
When asked whether the financial crisis was one of the times he got it wrong he answered, "I don't know."
If there is a photo in the dictionary next to the word "clueless" it should look like Alan Greenspan.
These are outrageous statements by a financial regulator whose job was to protect the entire U.S. economy. The fact that the lead-up to the financial meltdown in 2008 happened under Greenspan's watch seems to have escaped his grasp.
Imagine if airline pilots only landed 70 percent of airplanes, crossing guards only protected 70 percent of students or if your bank only honored 70 percent of your checks. It would be a public scandal. There would be indictments; prosecutions and surely the perpetrators would face consequences. We need the same expectation of safety for our banks that we have for airplanes flying America's skies--that they won't crash.
Nobody is asking anybody to predict the future, but there were other economists who saw what was happening and who didn't have the job of protecting the public. It would seem that Greenspan had the wrong personality and outlook for the job of Federal Reserve Chairman. He acted more like "Wall Street's man in Washington" than "the most powerful person in banking."
What we really learned from his testimony is what many already know: Alan Greenspan was and still is ideologically opposed to oversight of Big Banks and Wall Street. He didn't take action to stem the financial crisis because he didn't believe in action. That is the worst quality in a financial regulator. We want our sheriffs to catch the bad guys just like we want financial regulators to keep the Big Banks in line.
The failures in Washington over the last ten years--like the failures at the big banks--had two things going on: bad laws and regulators who didn't believe they had a role to play. Both things need to change.
Financial reform is already underway in Congress and it is still undecided as to whether reform will truly rein in the most dangerous Wall Street practices that ultimately hurt the entire economy or whether it will paper over the need for reform.
But what has to happen even if Congress won't do it is a complete repudiation of the regulators who were asleep at the switch during the financial crisis. Only if future regulators know that public shame or worse is the cost of their failures will laws--even new ones--work effectively.
That is why the Commission needs to call or subpoena former Securities and Exchange Commission Chairman Christopher Cox. The public was promised testimony by Cox in January but he has yet to appear. Cox, like Greenspan, was ideologically opposed to a strong SEC to protect consumers. During his tenure leading up to the crisis Cox hobbled the SEC in a range of areas. Cox is now tied directly to the collapse of Lehman Brothers (here, here and here).
And, the new laws and rules should be written so they're bulletproof against even a shortsighted Federal Reserve chairman with a very thin briefcase, or an SEC chairman with a campaign war chest full of Wall Street money.
The Commission has hearings through Friday, April 9. The Huffington Post team is doing the best live-blogging of the hearings on the web. You can follow them online at www.FCIC.gov. Also check out Accountable America's coverage. I help lead that group as chairman.