Econintersect: One of the journalists who got some inside views of the Great Financial Crisis (GFC) is Gillian Tett of the Financial Times. Her book, “Fools Gold“, told the story of how some of the most damaging financial engineering tools involved in the crisis were developed by JP Morgan and then implemented with utter abandon by others. Thus it is fitting that Tett should interview one of the people who was at the very heart of monetary policy (and had great influence on political action and fiscal policy) during the decades leading up to the GFC, former Chairman of the Federal Reserve Board, Alan Greenspan.
Earlier this month Tett interviewed Alan Greenspan in his Washington office. The resulting article was published by the Financial Times Friday (25 October 2013). It is remarkable as a pleasant discussion but unremarkable as to providing any new insight into the former Fed chief. Perhaps the most insightful point in the entire article is this quote:
“I am not in favour of breaking up the banks but if we now have such trouble liquidating them I would very reluctantly say we would be better off breaking up the banks.”
Does he favor smaller banks or not? The Greenspan double-speak of his Congressional testimony days is still there.
Econintersect has obtained a copy of a note sent to Tett by Janet Tavakoli.
“Dear Gillian,
Greenspan feigns surprise that bankers aren’t better stewards of capital. Yet he had a front seat view of the largest S&L control fraud and subsequent scandal involving the U.S. Senate’s “Keating Five.”
He was a consultant and lobbyist for Lincoln Savings, one of the largest control frauds during the S&L crisis. Owner Charles Keating, who had hired Greenspan, was indicted and imprisoned.
At the time it was a huge scandal, but I must admit, I had forgotten the Greenspan-Keating connection until I was recently reminded.
William K. Black literally wrote the book on the crisis, The Best Way to Rob a Bank Is to Own One. Why not interview him to provide additional context to Greenspan’s memory lapse and revisionist history?”
Perhaps the Econintersect impression of a “pleasant discussion” is far too shallow?
Tavakoli also advised us she sent a link to a New York Times column from 1989: “Greenspan’s Lincoln Savings Regret“
Note: Janet Tavakoli, founder and president of Tavakoli Structured Finance since 2003, is one of the world’s foremost experts in credit derivatives, complex derivatives, interest rate swaps, collateralized debt obligations.
Sources:
- An Interview with Alan Greenspan (Gillian Tett, Financial Times, 25 October 2013)
- Janet Tavakoli, private correspondence.
- Greenspan’s Lincoln Savings Regret (Nathaniel C. Nash, The New York Times, 20 November 1989)
