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Posted Nov 24, 2010 09:20am EST by Aaron Task in Newsmakers
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Date Posted: 26/11/10 10:04:31
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Taibbi Blames Greenspan: "The Biggest (Blank) in the Universe"
Posted Nov 24, 2010 09:20am EST by Aaron Task in Newsmakers
Related: XLF, FAZ, GS, JPM, BAC, C, AIG
In All the Devils Are Here, co-authors Joe Nocera and Bethany McLean, say the answer to the "who's to blame for the crisis?" question is everybody, as the title of the book implies.
That's poppycock, according to Rolling Stone contributor Matt Taibbi, who'd probably use an unprintable expletive rather than "poppycock."
In his new book, Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America, Taibbi lays the blame for the financial crisis largely at the feet of one man: Alan Greenspan.
"He had this specific role as the Fed chief and created this psychological condition on the Street where everybody knew that every time they screwed up...he would come to their rescue," Taibbi says. "Daddy would bail everybody out with all this cheap money."
Commonly known as "the Greenspan Put," the belief system is a very specific form of moral hazard that came to dominate the financial landscape during Greenspan's tenure as Fed chairman. Beginning with the market's crash in October 1987 shortly after he became chairman, Greenspan faced a series of increasingly large financial crises - Orange County, Ca. and the Mexican pesos crisis in 1994, the 1997 ‘Asian Flu', the Russian debt default and implosion of Long Term Capital Management in 1998, the bursting of the dot.com bubble in 2000, the 9/11 terror attacks in 2001 and the beginning of the end of the housing/subprime bubble at the end of his tenure in 2006.
In almost every case his "solution" was to flood the system with money and bail out the speculators.
Adding insult to injury, Taibbi notes, Greenspan professed to be a devotee of Ayn Rand's philosophy of objectivism, which abhors state involvement or interference in almost any aspect of society, most certainly the markets.
Greenspan pushed for Rand-style deregulation such as the repeal of Glass-Steagall, which helped give us the "too big to fail" banks, and opposed efforts to regulate derivatives, predatory mortgage lending and...just about anything else.
"He represented this kind of contradiction," Taibbi says. "On the one hand, it's this 'arch-capitalist, government has no role anywhere, hands off everything' ideology and at the same time he was building this welfare state" for Wall Street.
For these reasons -- and his subsequent refusal to take any real responsibility for his actions -- Greenspan deserves outsized blame for the financial crisis and its aftermath, says Taibbi, who calls the former chairman the "the biggest [blank] in the universe" in his decidedly un-PC and highly entertaining new book.
Aaron Task is the host of Tech Ticker. You can follow him on Twitter at @atask or email him at altask@yahoo.com
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