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.