Greenspan’s mea culpa

“If you had any doubts that we’re living in a new era,” said The Dallas Morning News in an editorial, Thursday’s congressional grilling of “the once godlike former Federal Reserve chairman” Alan Greenspan should settle them. During his 18 years as chairman, Greenspan was as close as the global economy had to a “Supreme Pontiff.” Now he's admitting that his gospel of unregulated free-market capitalism looks a little tattered.

And for a man “once remarkably hard to decipher,” said Steve Goldstein in MarketWatch, his admission of “shocked disbelief” in the market’s failure was “as clear as an empty Lehman Brothers office.” It just wasn’t “particularly convincing.” His theory was that banks’ self-interest would keep them honest—who’s surprised that their self-interest was in short-term gains?

He also failed to mention his contribution to the financial crisis: years of “ridiculously cheap” money, said the Los Angeles Times online. He rightly noted that “the Wall Street rocket scientists who designed derivative securities” were fatally optimistic. But “without cheap money, the credit-market bubble could never have reached the epic size that it did.”

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Still, his “mea culpa” was the “honorable thing for him to do,” said David Leonhardt in The New York Times online, and it can’t have been easy. “Markets certainly do many things very well,” but we’ve moved a little too far “toward laissez-faire economics,” and one result is Greenspan’s bubbles. Now, maybe the Fed can “attack the next bubble” before it bursts.