“I don’t have the discretion to use my own ideology to affect my judgments as to what the Congress is requiring the Federal Reserve and others to do[.]”
Former Federal Reserve Chairman Alan Greenspan’s Recent Congressional Q&A, as quoted by the Los Angeles Times.
The former Chairman of the Federal Reserve, Alan Greenspan, is known to have a great deal of respect for elected officials. He acknowledged that himself in a post-Fed interview with Maria Bartiromo of CNBC in front of the Capitol Building that he is an analyst who plays the tunes of others. He revealed who those others were, explicitly for perhaps the nth time, in his testimony to the Congress (on other occasions he would call them “elected officials” in his speeches).
The Federal Reserve Chairman can be sympathized with. He appears to have been under enormous political pressure to ensure that the Federal Reserve did not do its job. And Greenspan had delivered, in return for which he was renominated 4 times to the job he loved to do. What he had complied with has now boomeranged. And he is blaming the Congress.
That there was indeed political pressure is true. It has been well documented. Mostly, that pressure had come from the Congressional Democrats to raise homeownership. This, however, does not mean that Alan Greenspan, protected by the law from undue Congressional interference on how the Federal Reserve should carry out its mandate, should have complied. He could have ensured that enforcement of existing laws and regulations for which the Fed was responsible were indeed occurring.
Blaming Congress is convenient and perhaps is necessary for good reason, but doing so after playing an important role in orchestrating those policies does not speak well of Greenspan. Alan Greenspan, Robert Rubin and Larry Summers were the executioners of political will during the Clinton administration to not reform regulations.
Greenspan’s best chance to rehabilitate his tarnished reputation in his elderly years is to play a constructive role in reforming regulations rather than defend an unsustainable legacy.