Greenspan in Denial

Those in a state of shocked disbelief rarely think clearly...

notes:

"As I wrote last March: those of us who have looked to the self-interest of lending institutions to protect shareholder’s equity (myself especially) are in a state of shocked disbelief..."   Allen Greenspan pg 1

"What went wrong with global economic policies that had worked so effectively for nearly four decades?" Alan Greenspan pg 2

The big problem with the system that had worked for four decades are the changes brought by the Internet. The flaws in the system have been accumulating for the past 7 to 10 years - the big change that is being talked about as if it just appeared overnight is simply that the dysfunction of the system has become unavoidably obvious with the commencement of the worldwide Collapse of Debt.

Greenspan makes an attempt to lay blame on the securitization of home mortgages creating such high demand that subprime lending grew large and strong enough to topple the world financial system.

The claim that subprime mortgages are "undeniably" the original source of the crisis is weak. In the early stages of the the meltdown subprime mortgages were named as the only problem that the financial system faced, which has now undeniably been proven to be completely false.

"What went wrong with global economic policies that had worked so effectively for nearly four decades? The breakdown has been most apparent in the securitization of home mortgages. The evidence strongly suggests that without the excess demand from securitizers, subprime mortgage originations (undeniably the original source of crisis) would have been far smaller and defaults accordingly far fewer."  Greenspan pg 2

Full text: Testimony of Dr. Alan Greenspan

Committee of Government Oversight and Reform

October 23, 2008

Word Count: 1,133