In a typically cryptic March 11 op-ed in the Wall Street Journal, Alan Greenspan, who most right-thinking people blame for a large part of the current economic crisis, attempts to defend his legacy:
Given the decoupling of monetary policy from long-term mortgage rates, accelerating the path of monetary tightening that the Fed pursued in 2004-2005 could not have "prevented" the housing bubble. All things considered, I personally prefer Milton Friedman's performance appraisal of the Federal Reserve. In evaluating the period of 1987 to 2005, he wrote on this page in early 2006: "There is no other period of comparable length in which the Federal Reserve System has performed so well. It is more than a difference of degree; it approaches a difference of kind."
In response, Tim Iacono, from The Mess That Greenspan Made, skewers him pretty good, as Friedman died in 2006 and therefore did not live to see how "difference of kind" it actually became:
That's just pathetic when you think about it...
Even after the recent admonishment from the late Milton Friedman's long-time partner Anna Schwartz as documented in "A 92-year old finger pointed squarely at the Fed", he has the chutzpah to cite favorable words from 2006.
Tom then quotes other folks who take issue with Greenspan's feeble defense, and who stick the knife in further. I particularly like this, from Ian Shephardson, quoted in the LA Times:
"Mr. Greenspan lauded lenders’ ‘innovations.’ The number of subprime ARMs rose more than ninefold from late 2000 until the peak in mid-2007, with three-quarters of the increase coming between mid-2003 and mid-2005.
"The delinquency rate on these loans, by the way, now stands at 24.2% and it is still rising rapidly. Prime fixed-rate deliquencies are at 3.92%.
"Mr. Greenspan ought to have used the pages of the Journal to apologize to the nation. Instead, his piece will stand as a testament to his hubris, or perhaps his delusions."
As Ralph very famously said in Groundhog Day, "I think both."
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