Poor Us: The Great Depression 2.0

February 14, 2009

Greenspan tells CNBC: Greed happens

Filed under: Who knew? — debacled @ 8:23 pm
Very Funny by italiansausage via DeviantArt

Send in the clowns: "House of Cards" showing 2-14, at 7 and 10; 2-15 at 9, check CBNC for more showings.

At the end of CNBC’s harrowing (as in “we’re doomed”) House of Cards, reporter David Faber tried to find out if Former Fed Chairman Alan Greenspan took any personal responsibility for the current fix we’re in.  As his troubling response (transcript after jump) shows, he didn’t see anything wrong with sub-prime lending, liar loans, credit default swaps and the other confidence games that now threaten global stability.  His only problem:  too bad his boys  got caught.

In absolving himself and his ilk Greenspan did ponder this rhetorical question: “Looking at the way we all behaved, how is it possible that this species built up such an extraordinary world standard of living that has drawn hundreds of thousands of people out of poverty?”  It begged the answer “because greed is good.”

Faber wisely gave Greenspan the last word, but yesterday on Jim Lehrer’s New’s Hour, Jared Diamond,  provided a much more plausible answer based on his book Collapse: How Societies Choose to Fail or Succeed.

“One of the predictors of a happy vs. an unhappy outcome (to the economic collapse) has to be with the rule of the elite or the decision makers or the Bread Line, Chicago, WPA photopoliticians or the rich people within the society.  If the society is structured so that the decision makers themselves suffer from the consequences of their decisions then they’re motivated to make decisions that are good for the whole society  whereby if the decisionmakers can make decisions that insulate them from the rest of society then they are likely to make decisions that are bad for society.  [In this case] I think I would like the rich to suffer even more, the politicians to suffer even more because they would then be motivated to solve the problems and they wouldn’t have the sense that “It’ll be okay for us.”
While we’re waiting to find out if those Master’s of the Universe have built themselves a solid-gold getaway car, here is the rest of Greenspan’s parting words from “House of Cards” on the causes for the current financial crisis. Somewhere, Ayn Rand is laughing out loud:

David Faber: If somewhere along the line someone could have said to the the guys at the bank,  “You’re doing the wrong thing,”  [said] to the lender, ‘You’re doing the wrong thing,’  maybe we could have averted this crisis.”

Alan Greenspan: It’s not that they weren’t aware the risks were there. It’s not that these people were dumb. They knew precisely what was going on. The vast majority of them thought that they knew when to get out. It was a failure of our best and our brightest.

David Faber: “You seem to have been relying on the good judgment of the management to say, ‘We’re going to step out now.’  These weren’t bad decisions they were making. These were the worst decisions financial executives have ever made. Greed played a part in this.

Alan Greenspan: “And you’re going to pass legislation that’s going to outlaw that. Try it.

Faber: So you still believe in the free market…

Alan Greenspan: I firmly believe that because I know of nothing in the evidence of the alternatives.

Faber: Fully acknowledging the bad things that go along with it?

Greenspan: This is one of the most extraordinary things about this whole episode. Looking at the way we all behaved, how is it possible that this species built up such an extraordinary world standard of living that has drawn hundreds of thousands of people out of poverty?  The thing we should be most extraordinarily appreciative of is how far this system has carried us because there is no doubt that somewhere in the future we’re going to have this thing again. It will not be for quite a period of time, but it will occur because the flaws in human nature are such that it doesn’t work.


New’s Hour mp3: Societies and Anxieties: Richard Solomon interviews Jared Diamond



  1. Yes, greed will happen again but it wouldn’t be a problem under proper regulation or oversight. Our present system requires severe regulation to prevent greed from getting out of control. However, if we were to have the capitalist system envisioned by Adam Smith, we wouldn’t have Wall Street companies so large that we couldn’t let them fail. The root of our problem started about 1980 when we discovered options as a major part of pay. We thought it would motivate workers to work harder. But it motivated management to think near term instead of building companies. Options motivate workers to think about the stock price rather than their work and bonuses motivate people to do whatever is necessary to maximize the bonus.

    I recently discovered Ray Carey’s work. He was the CEO of NDT and has a website called democatic-capitalism.com. He labels our present system as Ultra-Capitalism and I think he describes the origin or our problems. His work should be a must read for all of our politicians.

    Getting back to the Green man, it he had been less concerned with his legacy and punctured the bubble before it got so very large, we would have experienced a mild recession but by letting it build, he assured a major recession, one that may dwarf the 30s. Our Grandchildren are going to put our pictures on the wall and use them a dart boards.

    Comment by Larry Smith — February 27, 2009 @ 1:36 am

  2. I only hope my grand kids will have the wherewithal to buy darts and a wall to throw them at. At this point, I wouldn’t take the bet. I will check out Ray Carey, however.

    Comment by debacled — February 27, 2009 @ 3:57 am

  3. A long-time in comming – our demise was hastened largly by 3 acts 1) Gramm/Leach/Bilely Act, 2 NAFTA 3) PNTR.

    All passed under WJ Clintons covert reign of USA destruction, all hole-hartedly supported by most Republicans & many Democrats, (ignorant &/or pandering to Wall Street Bankers – seeking to do their “business” in a world marketplace).

    The Middle-Class Majority is no longer represented by either party, so both parties are moving in fast-forward to destroy it.

    So far, so good ….

    Comment by Which Golden Rule? — March 31, 2009 @ 1:25 am

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