Economic “Maestro” Alan Greenspan defended his record recently saying that the responsibilities within the Treasury Department are not an exact science, and nothing is foolproof. He explained that in forecasting markets if they get it right 60% of the time they are doing very well. So, 60% is doing very well? This means that normally they are probably correct about 50% of the time. Whether it is markets or weather, forecasting anything at 50% is not forecasting – it’s guessing. And that is what finance and markets are all about really. I admire Greenspan for facing this frosty panel and admitting he made a mistake. But it was his mistake that tells us more about our country than it does about him.
“I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms.”
In other words he is saying that his mistake was trusting that people in charge would do the right thing. This is not a naïve presumption on Greenspan’s part. We want to believe that the few in these positions are working for the benefit of all, not the destruction of the entire system for their own personal gain. Yet, when a Chief Executive Officer leads a company to a massive financial loss and still earns a massive financial bonus, the motivation is purely personal gain. The Guardian reported that “leaders at Wall Street’s top banks are to receive pay deals worth more than $70bn for their work so far this year – despite plunging the global financial system into its worst crisis since the 1929 stock market crash”. You and I would have a difficult time accepting these payouts now, knowing our neighbors are losing their jobs and their savings. These people are amoral and the majority of us can’t rationalize this behavior any more than we can that of a serial killer. They are wired differently. There is a place for people like this. We know who they are and where they are. One of them is now in Greenspan’s old office and politicians are lining up to shake his hand.