Greenspan's Hidden Agenda

Published on by The Inquirer

The former Fed chief's plug for nationalizing banks is vertigo-inducing. It's also a conflict of interest—and a sign of just how far he has fallen.

There is something sad about watching former Fed Chairman Alan Greenspan lose most of the intellectual underpinnings of his life. A few months ago he famously conceded that there was a "flaw" in the economic model with which he thinks about the world, and that he was "distressed" by that realization. (Of course, his flaw ended up costing the economy trillions of dollars, so merely being distressed seems a bit mild.)

Now Greenspan tells us that temporarily nationalizing broke US banks might be OK. If that doesn't stop you in your tracks, it should. The man often called the high priest of laissez-faire capitalism is saying that he can imagine briefly taking some of the most troubled US banks into state ownership because that is better than the alternative of letting the market sort it out. That is vertigo-inducing indeed, like Lenin doing an about-face on the whole capitalism thing. It is, quite rightly, getting a lot of attention.After all, if Greenspan thinks there are problems with laissez-faire capitalism, and with market-based solutions to banking problems, what is he likely to say next?

That marginal revenue doesn't equal marginal cost for profit maximization? The economic mind boggles at the idea.

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