Listening to this now is almost surreal. Budget surpluses as far as the eye can see? Greenspan starts at the 2:40 mark:
[CSPAN is now offering all their archived video.]
Moving forward to today, Greenspan attempts to defend the Fed under his leadership:
Greenspan reiterated his view that Fed policy under his chairmanship did not lead to the housing bubble and the financial crisis by keeping interest rates too low for too long. Instead, a global savings glut led to low mortgage rates and a housing boom, he said.
Mr. Greenspan, once celebrated as the “maestro” of economic policy, has seen his reputation dim after failing to avert the credit bubble that nearly brought down the financial system. Now, in a 48-page paper that is by turns analytical and apologetic, he is calling for a degree of greater banking regulation in several areas.
The report, which he is to present Friday to the Brookings Institution, is by no means a mea culpa. But ,,, Mr. Greenspan, who has long argued that the market is often a more effective regulator than the government, has now adopted a more expansive view of the proper role of the state.
He argues that regulators should enforce collateral and capital requirements, limit or ban certain kinds of concentrated bank lending, and even compel financial companies to develop “living wills” that specify how they are to be liquidated in an orderly way.
And he acknowledged shortcomings in regulation...
“For years the Federal Reserve had been concerned about the ever-larger size of our financial institutions,” Mr. Greenspan wrote. Fed research has not been able to find economies of scale as banks grow beyond a modest size, he said, and in a 1999 speech, Mr. Greenspan warned that “megabanks” formed through mergers created the potential for “unusually large systemic risks” should they fail.
Mr. Greenspan added: “Regrettably, we did little to address the problem.”
The former Fed chairman also acknowledged that the central bank failed to grasp the magnitude of the housing bubble but argued, as he has before, that its policy of low interest rates was not to blame.
Here is the paper:
Alan Greenspan is presenting a paper at the BPEA conference today - his draft is here.
I don't think Greenspan can prevent the conclusion that "The Maestro" played a few bad (and ultimately harmful) tunes.