It is really a sad commentary on the TV medium that given the chance to ask some hard questions of Alan Greenspan, it has no idea what to ask. In last night’s 60 Minutes interview with Alan Greenspan, Lesley Stahl looked like a deer caught in the headlights. This was a big interview and she biffed it.We were supposed to be impressed by Mr. Greenspan’s fascination with numbers and statistics, like the protein content of wheat. Hooey. He’s an economist.
If there was any revelation, it was in Mr. Greenspan’s vanity. (The view that Stahl elicited from Greenspan, that “everyone is a social climber”, was bizarre.)But the worst was Stahl’s inability to counter Greenspan’s assertion that he failed to anticipate problems from the subprime mortgage fiasco, that is sending shock waves through world credit markets.As she fumbled in her notes, Stahl was missing the hard questions.
Why does the mainstream media persist in focusing on the retail end of the mortgage industry? Sure, there was plenty of fraud and corruption and plain unethical lending. But that’s not even close to the main concern, for a Federal Reserve chief.The retail end of the mortgage industry–that Congress is also focusing on–is a red herring.The world economy is not reeling from too many adjustable rate mortgages, or, lending to poor Americans. Come on!The world economy is reeling because Wall Street took the ordinary mortgage industry and turned it into riverboat gambling, using ordinary mortgage loans and multiplying the underlying debt 10X, 20X, 100X, then selling the debt to investors without friction of regulation, protected by a phalanx of bankers, road pavers, cement manufacturers, and political contributors.
As Federal Reserve chair, with a fascination for arcane numbers, Alan Greenspan surely knew three things: 1) that the outsized role of securitization on Wall Street was ballooning due to lack of regulations or reporting standards, 2) that the world of financial derivatives, dreamt up by Salomon bond trader Louis Ranieri in the 1980’s, had rained billions of dollars in commissions on Wall Street while injecting unheard of risk into world financial markets, and 3) that currying the favor of Wall Street involved active disassociation between the first two points.
But Stahl and 60 Minutes simply repeated the rote business of 15 second sound bites on nightly news: the foreclosures, the for sale signs, the layoffs.The question for Greenspan is simple: what did you know, and when did you know it, about financial derivatives related to the mortgage industry? Who did you talk to, Mr. Greenspan, in the building and construction industries who played to your vanity and genius by ratcheting down the federal funds rate to the lowest levels in US financial history?
Why didn’t you ask for better information, Mr. Greenspan, or regulation?
It simply doesn’t wash that Greenspan wasn’t paying attention. On weekends he and his wife Andrea Mitchell were hobnobbing on Miami Beach with celebrities and the swell crowd, the geek version of F. Scott and Zelda Fitzgerald off Lincoln Road. What didn’t Mr. Greenspan see? All the indicators of wealth driven by a financial bubble were in plain view. (see eyeonmiami.blogspot.com, archive feature “housing crash”.)
Stahl and 60 Minutes blew it.
ALAN FARAGO of Coral Gables, who writes about the environment and the politics of South Florida, can be reached at email@example.com