Commentary: Ex-central banker’s defense of his legacy appears hollow
For a man who was once remarkably hard to decipher, Alan Greenspan is now as clear as an empty Lehman Brothers office.
The former Federal Reserve chairman is in full-frontal legacy defense mode, and he’s not doing a particularly convincing job.
According to his prepared testimony before the House Oversight Committee, Greenspan lamented that “those of us who have looked to the self-interest of lending institutions to protect shareholder’s equity (myself especially) are in a state of shocked disbelief.”
Cue up Casablanca, and the “I’m shocked, shocked, to find gambling here,” line from the Captain Renault character.
The truth is that the executives at financial institutions had very little interest in protecting shareholder’s equity.
Sure, they had bonuses tied to stock performance, but awards were distributed annually. And the awards certainly didn’t have strings attached that allowed for claw backs due to underperformance or even insolvency.
The bonuses favored gambling on a year or two of outsized gains, just as at Casablanca’s Rick’s.
Another classic line from Captain Renault was: “We mustn’t underestimate ‘American blundering.’ I was with them when they ‘blundered’ into Berlin in 1918.”
And Greenspan was with the world’s financial institutions when they blundered, and plundered, into the current mess.