Thursday, February 12, 2009

Where The Buck Does Not Stop

This sounds like fun:

Greenspan Says He Was Mystified by Subprime Market

Alan Greenspan, the former chairman of the Federal Reserve, told CNBC in a documentary to be shown Thursday night that he did not fully understand the scope of the subprime mortgage market until well into 2005 and could not make sense of the complex derivative products created out of mortgages.

"So everybody in retrospect now knows that that boom was developing under the markets for quite a period of time, but nobody knew it," Mr. Greenspan told CNBC's David Faber. "In 2004, there was just no credible information on that. It wasn't until we got well into 2005 that the first inklings that that was developing was emerging," he said.

Next time you get that worrying feeling that you might not be qualified for some job you'd like to apply for just remember that Greenspan didn't think he had to understand some rinky-dinky market to run the money supply of this country. Neither did he ever express much doubt about the wisdom of the markets in general. But it's still someone else's fault.

What makes me disinclined to believe this 'not mea culpa' is that someone as far removed from the centers of power as a lowly goddess of snakes was wondering about all this trading and packaging long before 2004. For one thing, there was something very odd about the way banks kept eating up each other, so that some months she couldn't remember what the name of her bank now was or who held her mortgage or her house insurance policy.

It was almost as if you woke up one morning and into the bedroom walked some stranger, telling you that your sweetie had traded contracts with this stranger who was, from that moment onwards, to take over the duties of being your partner. And nobody knew?