By now, it hardly counts as news when a prominent member of America’s ruling class refuses to take responsibility for the havoc and misery his actions have wrought. In post-crisis America, dissembling and baroque exculpatory alternative histories have become a kind of patois among the best and brightest.
But even by this degraded standard, Alan Greenspan’s recent performance before the Financial Crisis Inquiry Commission (FCIC) stands out. The crisis has not been kind to Greenspan’s reputation. Yet despite overseeing a Fed that helped inflate the housing bubble and failed to use its regulatory authority to curtail fraud and predatory practices, Greenspan is still a member of high finance’s club. When Goldman Sachs wants a big name to wow the attendees at a conference, it calls in the erstwhile Oracle. The über-Establishment Brookings Institution published a forty-eight-page paper by Greenspan on the origins of the crisis that reads like a brief for the defense.
Greenspan’s excuse for his malfeasance has more or less been: nobody could have predicted it. "The Federal Reserve had as good an economic organization as exists," he told the House Committee on Oversight and Government Reform in October 2008. "If all those extraordinarily capable people were unable to foresee the development of this critical problem…we have to ask ourselves, Why is that? And the answer is that we’re not smart enough as people. We just cannot see events that far in advance."
The obvious problem with this account is that, well, there were lots of people who predicted exactly what would happen. Michael Lewis just wrote an entire book about a handful of investors who made a fortune betting on a housing market meltdown. The Nation‘s own William Greider and Dean Baker spent nearly the entire decade warning of the dangers of the massively inflating housing bubble. Former Commodity Futures Trading Commission chair and current FCIC member Brooksley Born famously warned of the dangers of unregulated credit default swaps, only to be shot down by, among others… Alan Greenspan. And in 2004 Chris Swecker, then the assistant director of the FBI, warned that mortgage fraud "has the potential to be an epidemic."
So Greenspan has changed his story. He now claims that he did, in fact, predict what was happening but that, predictions and foresight aside, there was really nothing he could have done. The crisis was the inevitable result of trends in global finance that stretch back at least to the fall of the Berlin Wall. "Is it fair to say that the origin of the crisis was the demand for subprime loans?" asked FCIC vice chair Bill Thomas, looking, it appeared, for an easy yes. Like an arsonist pinning the blame on Prometheus, Greenspan refused to give it to him: "The cause actually goes back to the cold war."