Congress Now Has its Scapegoat

http://online.wsj.com/article/SB122476545437862295.html

Alan Greenspan appears to be the front runner for scapegoat in the financial crisis. The article reports in part:

Returning to Capitol Hill amid a financial crisis rooted in mortgage lending, Mr. Greenspan said he had been wrong to think banks' ability to assess risk and their self-interest would protect them from excesses. But the former Fed chairman, who kept short-term interest rates at 1% for a year earlier this decade, said no one could have predicted the collapse of the housing boom and the financial disaster that followed.

Lawmakers weren't buying his explanations. "You had the authority to prevent irresponsible lending practices that led to the subprime-mortgage crisis. You were advised to do so by many others. And now our whole economy is paying its price," said Rep. Henry Waxman (D., Calif.).”

Two things are worthy of note. First, during the time when Greenspan was Federal Reserve Chairman, he was part of the federal government. Second, as the Federal Reserve Chairman, he implemented the policies of the federal government. These are the key take aways. Pushing Waxman to the logical conclusion, he is claiming that Greenspan had the authority to overrule Congress and to restrict their efforts to manipulate the free market with Freddie and Fannie and other socialist programs. We should take Greenspan's admission that he could not forsee the banks inability to assess risk and their own self-interest in light of government excesses to heart. The conclusion is to remove government influences from the running of the free market. Only then will banks have the ability to assess risk and their own self interest. Thank you Mr. Greenspan for your judgment, but I fear Washington will not be understood it. They are looking for a scapegoat and not the truth.