Greenspan Defends Legacy. Admits Confusion.

"When I first ran across the sharp spike in subprime mortgage originations estimated by a private vendor (Note that the Fed didn't even track this data), which was later confirmed I said, 'This makes no sense. Markets don't move that fast.'" - Alan Greenspan to the Wall Street Journal April 8,2008

Uhh, yes they do. Thanks to you. More below...

Mr. Greenspan is in the midst of a full out reputation redemption initiative.  He sat down with the friendly media at the Wall Street Journal for a bit of misdirection and sleight of hand.  
http://online.wsj.com/...

Including a slick video interview and Q & A!
http://online.wsj.com/...

So far, the WSJ poll results indicate that even the readership of the Journal ain't buying what he's selling.
http://forums.wsj.com/...

If you can read this self serving piece without having your head explode, you will see that he still really doesn't get (or more likely won't own up to) the role that the overheated global derivatives and structured product markets had to do with creating a huge subprime mortgage sector in the first place. He spouts some nonsense about a "global savings glut" causing the bubble in housing, a comment that probably had John Taylor rolling his eyes when they sat down at a recent meeting.

Rational, regulated lenders wouldn't have made these loans no matter how much excess capital they had.  Rather, the insatiable demand for the crappy loan raw product from structured finance vehicles, manufactured by the financial alchemists on Wall Street, encouraged the massive NINJA (No INcome Job or Asset)loan creation.  The fee income from CDO's and other constucts was too tantalizing for Wall St not do as much as they possibly could (and as quickly as possible).  More and more leverage quickly became embedded in the financial system under Mr. Greenspan's purposefully unseeing eyes (the derivative market can self regulate, he opined on so many occasions) until buyers of this garbage finally started having indigestion.  That was the pin in the Greenspan bubble. Indigestion. Worldwide indigestion.

The Greenspan Fed, and other central bankers allowed credit creation and systemic risk management to become disintermediated from the regulated banking sector to unregulated derivative players. Now Mr. Greenspan says he's shocked, absolutely shocked, that the market wasn't disciplining itself. Give me a break. (Second diary still learning the ropes)