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June 19, 2010, 12:01 a.m. EDT · Recommend (16) · Post:
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By Howard Gold
NEW YORK (MarketWatch) -- In one of the most dramatic moments in the global financial crisis, former Federal Reserve Chairman Alan Greenspan testified before Congress in October 2008, just weeks after the collapse of Lehman Brothers spread fear and panic around the world.
Rep. Henry Waxman (D-Calif.) bluntly asked him, "Were you wrong?"
"Partially," replied the humbled Greenspan, who once sat at the commanding heights of the world's economy.
"Yes, I found a flaw..., [a] flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak."
"That's precisely the reason I was shocked," he continued, "because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well."
Reuters Former Federal Reserve Chairman Alan Greenspan.
More than three decades earlier, when Greenspan had been sworn in as chairman of President Gerald R. Ford's Council of Economic Advisers, Ayn Rand herself witnessed the ceremony in the Oval Office with her husband, Frank O'Connor, and Greenspan's mother.
Rand brushed aside concerns Greenspan was "selling out" her anti-statist principles by taking such a high government position.
"Alan is my disciple," she declared. "He's my man in Washington."
Somewhere, the Matriarch of Objectivism must be spinning in her grave.
Almost since his retirement as Fed chairman in 2006, Greenspan has faced intense criticism that his actions helped cause the worst financial crisis since the 1930s.
And his own longstanding ties to Rand have stirred new controversy over what role her ideas might have played in the crisis, showing ironically how important a thinker she remains, nearly three decades after her death. Read Moneyshow.com commentary on Ayn Rand.
Greenspan's involvement with Objectivism dated back to the mid-1940s, when he was enthralled by Rand's novel, "The Fountainhead." He later became a regular at her Saturday night soirees in Manhattan and even sat in on Rand's readings of chapters from the still-unpublished "Atlas Shrugged."
Rand dubbed Greenspan "the undertaker" for his somber mien. And he remained aloof, harboring skepticism about her philosophy for quite a while.
Many companies are in a bind, squeezed by higher costs, but still reluctant to pass price increases to consumers who are still jittery from the recession. David Wessel discusses.
She had doubts about him, too. "Rand worried that Greenspan was an opportunist or social climber," wrote Jerome Tuccille in his 2002 biography, "Alan Shrugged." But as a successful businessman (he co-founded his economic consulting firm in the 1950s), "Alan was their only link to the real world outside Rand's living room -- outside their own imagination," Tuccille observed. It turned out to be a Faustian bargain.
In his 2007 autobiography, "The Age of Turbulence," Greenspan called Rand "a stabilizing force in my life...She introduced me to a vast realm from which I'd shut myself off."
He showed his loyalty when he and three other prominent Objectivists signed an open letter endorsing the expulsion of Nathaniel Branden and his wife Barbara from the group in 1968. (Branden had been the much-older Rand's lover years before, but was excommunicated after she learned of his extramarital affair with another woman.)
Greenspan also spelled out his evolving thoughts on free markets and the economy in several articles he wrote in the 1960s (three of which are reprinted in Rand's book, "Capitalism: The Unknown Ideal").
Peter Orszag, who is one of President Barack Obama's top aides, will walk away from Washington's budget battles next month before the job is done.
3:54 p.m. June 22, 2010 | Comments: 26
- frmkt | 1:32 a.m. June 19, 2010
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