Former head of the U.S. Federal Reserve Alan Greenspan on free-market philosophy
Former U.S. Federal Reserve Chair Alan Greenspan (L) asks if he is to be sworn in as he talks with House Oversight and Government Reform Committee chairman Henry Waxman (R) on Capitol Hill in Washington October 23, 2008. Greenspan told Congress, he is "shocked" at the breakdown in U.S. credit markets (Reuters/Kevin Lamarque)
A memorable exchange between U.S. Democratic congressman Henry Waxman and former U.S. Federal Reserve Chair Alan Greenspan:
"REP. HENRY WAXMAN: Do you feel that your ideology pushed you to make decisions that you wish you had not made? ALAN GREENSPAN: Well, remember that what an ideology is, is a conceptual framework with the way people deal with reality. Everyone has one. You have to -- to exist, you need an ideology. The question is whether it is accurate or not. And what I'm saying to you is, yes, I found a flaw. I don't know how significant or permanent it is, but I've been very distressed by that fact. REP. HENRY WAXMAN:You found a flaw in the reality... ALAN GREENSPAN: Flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak. REP. HENRY WAXMAN: In other words, you found that your view of the world, your ideology, was not right, it was not working? ALAN GREENSPAN: That is -- precisely. No, that's precisely the reason I was shocked, because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well."
The international financial sector had just imploded. The U.S. housing bubble had burst. Economies bled cash and banks provided few protections for shareholders and their investments.
Mr. Greenspan recognized the meltdown directly challenged one of his most basic ideas -- that fewer regulations make for more efficient markets.
He's written about the meltdown in his new book The Map and the Territory: Risk, Human Nature and the Future of Forecasting. And, as part of our special series Project Money, Alan Greenspan joined us from our Washington studio to talk the stock market crash of 2008 and his free-market philosophies.
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This segment was produced by The Current's Howard Goldenthal.
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