Greenspan Concedes to `Flaw' in His Market Ideology

Greenspan Concedes to `Flaw' in His Market Ideology (Update2)

By Scott Lanman and Steve Matthews Oct. 23 (Bloomberg) --

Highlights:

Former Federal Reserve Chairman Alan Greenspan: said a ``once-in-a-century credit tsunami'' has engulfed financial markets and conceded that his free-market ideology shunning regulation was flawed. He stated I was ``partially'' wrong in opposing regulation of derivatives and acknowledged that financial institutions didn't protect shareholders and investments as well as he expected. Forecasting is an inexact science.

Greenspan opposed increasing financial supervision: as Fed chairman from August 1987 to January 2006. Policy makers are now struggling to contain a financial crisis marked by record foreclosures, falling asset prices and losses tied to U.S. subprime mortgages.

``What went wrong": former chairman wondered, with global economic policies that had worked so effectively for nearly four decades?''Greenspan reiterated his ``shocked disbelief'' that financial companies failed to execute sufficient ``surveillance'' on their trading counterparties to prevent surging losses.

Greenspan Revised Recommendations: Firms that bundle loans into securities for sale should be required to keep part of those securities and other rules should address fraud and settlement of trades.


Commentary

Falling Giant: Alan Greenspan, was once considered the most powerful and well respected man in finance has now lived long enough to see it turn around. We cheered him on when he helped us and now sneer because he failed us.


New Deal Regulation: It appears we are on the verge of a paradigm shift in free market regulations and oversight. Stay tune for a litany of new laws and oversight after the new administration comes into power in 2009.



Jim