Of course, Greenspan goes on to claim the current situation could not have been predicted, and that a return to his policies is the only thing that can save us now.
In the article cited above, Greenspan writes, "Those of us who look to the self-interest of lending institutions to protect shareholder equity have to be in a state of shocked disbelief."
Shocked disbelief? Seriously? I know NOTHING about markets beyond what I absorbed of economics from studying history and it seemed clear to me when he was praising the "resourcefulness" of the markets with the creation of ARMs that he was fueling the irrational exuberance. It sounded like 1928 -- buy stocks on margin, they never go down by very much or for very long! There's virtually no risk!
Now, he's telling us with a straight face that the government should always be ready to step in to mitigate losses in a bust, but never intervene with regulation to limit the size of the bubbles and windfall profits in the booms. I read that as the very wealthy should be encouraged to take huge risks and accumulate vast amounts of wealth, but should not be allowed to be completely wiped out when they exercise poor judgment because they are the economy. So, if some poor schmuck lives in a house in New Orleans without flood insurance (which wasn't required because the levees were backed by the full faith and credit of the U.S. government) and loses everything, that's the roll of the dice, that's the way market's work. But if a Wall Street firm rolls the dice and comes up empty, it is incumbent upon the taxpayers to bail them out?
I brings to mind another phrase from history -- Privatize the profits, socialize the losses.
Am I oversimplifying? Is there something I'm missing?
