Sybase Business Intelligence Solutions - Database Management, Data Warehousing Software, Mobile Enterprise Applications and Messaging
Sybase Brand Color Bar
  blank
 
 
 
 
 
 
 
 
 
 

Crying All the Way to Dodd-Frank; Greenspan on “A Couple of Hundred Detailed Regulations”

Alan Greenspan penned an op-ed in Tuesday’s Financial Times on the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, disparaging it almost point by point. I say almost point by point because, as the former chairman of the U.S. Federal Reserve put it, the law is “a couple of hundred detailed regulations.”

It’s as though Mr. Greenspan would have preferred the U.S. Congress to fix the tangle of calamities that caused the financial crisis in 500 words or less.

“Today’s competitive markets, whether we seek to recognize it or not, are driven by an international version of Adam Smith’s ‘invisible hand,’” Mr. Greenspan continued. “With notably rare exceptions (2008, for example), the global ‘invisible hand’ has created relatively stable exchange rates, interest rates, prices, and wage rates.”

It is staggering that 19 years as the Fed chairman has not helped Mr. Greenspan see that it is those exceptions that most concern legislators and regulators. The New York Times chief financial correspondent seems to agree.

“It reminds me of a defense lawyer arguing that while his client may have committed a few murders on one particular day, his conduct on all the other days of his life had been exemplary,” Floyd Norris said on his blog Wednesday. Mr. Norris also wondered if Mr. Greenspan’s own regulatory failures make him think success in that arena is impossible.

Mr. Greenspan makes the all-too-valid point that regulators cannot keep proper watch over the markets. Even U.S. Securities and Exchange Commission chairman Mary Shapiro has told Congress that her agency does not have the resources to do its job, while the House’s capital markets subcommittee chairman Rep. Scott Garrett (R-NJ) wants to cut the agency’s budget, as pointed out by Bloomberg on Wednesday.

All of that negativity got me wondering if Mr. Greenspan has an idea for a better law. If so, he should tell us — preferably in 500 words or less.

Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google Bookmarks

8 Comments

  1. Unfashenomic says:

    I have a two-word suggestion to fix the financial sector: “laissez-faire.” Even better, one word: “deregulation.”

    The “exceptions” that exist are due to previous efforts at accomplishing social goals by manipulating the market for housing, and capital funds more generally. Get rid of those first and see if it works before adding more red tape onto the current mess. The only people that will gain from denser regulations are the lawyers.

    Your quote from Floyd Norris is silly and backwards for equating free markets with murder. It would be more accurate to say that the market is more like a hard worker, who was sober for years and then acquired a drug problem (cheap, government assured credit) until one night it went on a binge and woke up in a dumpster the next morning. Blame the drug, not the engine of productivity which has created every advance in living standards known over the past 200 years.

  2. Guy Chocensky says:

    Contrary to the current neo-con myth…

    Government is not the problem.

    BAD government is the problem.

  3. Justin Dixon says:

    I don’t care for the Federal Reserve as an institution since it creates a false safety net for policy makers to fall back on. The fed tries to predict what the market will do, and then fluctuates the money supply. That is already outside the definition of laissez-faire. Frankly had Paulsen not attempted to bail out lehman brothers than bear sterns would have believed him when he told their CEO to sell the company in the next day or so (a move that would have prevented the harshest parts of this recession). Inconsistent treatment by government officials kept the economic climate to unstable for any company to know what to do. I think Paulsen was wrong to do the first bail out, but being inconsistent with how he handled things from there made the problems worse.

    The above commenter is mostly right, I would add that wasteful government including overly wordy laws that keep the layman from understanding what is legal and what is not is also a problem. As much as I have a problem with Greenspan for claiming free-market while putting our nation into debt with a fiat currency his claim that we don’t need the law to be this wordy is a valid point. Too much bureaucracy raises costs, is inefficient, and leaves much room for unregulated allocations of funds. (Whats easier to slip your personal money project into? A single page bill gone over by several congressmen and lawyers, or a 135 page bill that references other bills in ways that hides what the bill is actually saying unless you go through a library of laws in a very limited time to understand it?)

    Frankly it is not congresses duty to bail out companies unless its going to in state a business insurance policy for all American companies. We could do however with some awareness on things such as the fact that in every major crash we have had top investors have encouraged people to borrow money they couldn’t pay back for a non-guaranteed profit. We are doing it with college education now, and if the educations we pay for isn’t enough for us to get jobs that justify the debt than we will be looking at another nasty crash in a generation or so.

  4. duckyinfo says:

    One thing of curious note about Alan Greenspan is that he’s a disciple of Ayn Rand, author of ATLAS SHRUGGED and many others. He actually spent time in her inner circle of friends discussing what’s good for the individual is good for the whole, and other Rand soap boxes.

    Both seem to have forgotten their history and the fact that democracy demands a tight-rope act. Flinging wide the gates to corporations & individuals is just as bad as tightening controls and limiting freedoms. I disagree with any ‘true-believer’ ideals that aren’t tempered with reality.

  5. smitty says:

    Deregulation was all the rage in the 1910′s and 1920′s however in 1929 it took a “negative turn” I’m wondering, Unfashenomic, if you know what that negative turn was called.

  6. Joe says:

    I love when a writer portends to be more intelligent than a man like Alan Greenspan. Right or wrong, Greenspan is worth of respect on a Presidential level. When were you the most powerful force in global economics Derek?

  7. MarketGuru says:

    What do you think about the June end of quantitative easing?

  8. AllSeasonRadial says:

    Greenspan is nothing more than a highly competent thief. Libertarian drivel notwithstanding, he is an utter, tattered failure as an economist and less than that as a feeling human being.

Leave a Reply

Sybase privacy policy

*