Greenspan sees economy as green in the gills
Easy loans are a sign of the times. By that, I mean that Americans live in an age where consumers have choice as to how they will manage their short-term finances. It’s been easy for microloans to become popular, as they are fast, convenient and discreet. What a person needs money to cover before their next payday is nobody’s business but their own.
But when it comes to the U.S. banking system, it’s everybody’s business. Former Federal Reserve chairman Alan Greenspan, who is not enamored of President Obama’s Troubled Asset Relief Program, predicts more trouble during this recession.
Politico quoted Greenspan on the crisis: “Since the collapse of Lehman Brothers in September, we have been exposed to the most rapid and unremitting set of gloomy statistics that I have ever seen. It’s a once-in-a-century type event.”
Banks should fall under government control
According to the Wall Street Journal, Greenspan took an uncharacteristic step by referring to a new period of “increased regulation.” Turning away from his free-market roots and toward the appropriate plane of sense for this dire situation, Greenspan went on to say that
All of the sophisticated mathematics and computer wizardry essentially rested on one central premise: that enlightened self interest of owners and managers of financial institutions would lead them to maintain a sufficient buffer against insolvency by actively monitoring and managing their firms’ capital and risk positions. This premise failed in the summer of 2007.
So the government will step in?
The Financial Times reports that Greenspan is for the nationalization of banks. “It may be necessary to temporarily nationalise some banks in order to facilitate a swift and orderly restructuring,” he said. “I understand that once in a hundred years this is what you do.” Eating up toxic assets so that the industry can move forward. Whether President Obama and Timothy Geithner will put this into action remains to be seen. What happens with banks will be the business of each and every American who has hopes for a future of credit, jobs and trade, to name just a few. But as always, what happens when they need easy loans is the business of nobody but the individual in need.
Related articles
- G7 Finance Ministers Reject Protectionist Measures (huffingtonpost.com)
- Alan Greenspan Vouches for Nationalization (businesspundit.com)
- Treasury Weighs Hard Choices To Save Banks (cbsnews.com)
Ordinarily, I’m not really for nationalizing too many things – except maybe for health care – but if it makes a little bit more sense to do so, and it is already a cyclical thing that happens then I say do it. However, there have to be provisions for ending the terms of nationalization so that a healthier and more responsible business model comes out of it, because otherwise we will end up with a bunch of Wall Street tycoons that are like 8 year olds with no parents, and we can’t afford to let them have (metaphorical) dinners of ice cream and ketchup that crash the system again.