1 Boring Old Man

Greenspan Shrugged
Did Ayn Rand Cause Our Financial Crisis?
By Deborah Jones Barrow
Editor-in-Chief, wowOwow

"Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself especially, are in a state of shocked disbelief."

So said former Fed Chairman Alan Greenspan in his dramatic testimony before the House Committee on Oversight and Government Reform, as he was grilled by committee members on the causes of the nation’s financial crisis. Greenspan, whose laissez-faire capitalist leanings led him to reject decades of calls for more robust government oversight of financial markets, was repeatedly interrupted by the lawmakers in a contentious exchange that clearly shows the gloves are off in regard to the former chairman’s legacy.

In his startling admission, the former head of the Federal Reserve reveals that his long-held and controversial notion that enlightened self-interest alone would prevent bankers, mortgage brokers, investment bankers and others from gaming the system for their own personal financial benefit has, as the English say, come a cropper. Bankers ruled by anything other than greed?

Where did Greenspan ever get that idea? Ayn Rand…

…  Ayn Rand’s theory of the "morality of self-interest" exactly parallels Alan Greenspan’s testimony today about his now-shaken belief in the ability of "self-interest of lending institutions to protect shareholder’s equity." Early in his career, Alan was an avid Rand acolyte, a frequent guest at the Manhattan salon of the novelist and philosopher, and those who gathered to hear the litanies of like-minded notables were loosely known as "The Collective." It was there that the Rand philosophy of Objectivism was discussed in the context of current events, world markets and religion.

Today, 40 years after the heyday of those gatherings, Greenspan surprised many with his "Yes, I found a flaw" response to a grilling from the Committee. Responding to the clear failure of the notion of "enlightened self-interest" to stop the cascade of financial catastrophies that have roiled world markets, he said, "That is precisely the reason I was shocked, because I’d been going for 40 years or more with very considerable evidence that it was working exceptionally well.”

Greenspan’s critics have long charged that his refusal as Fed Chairman to impose greater government regulations on mortgage lenders is one of the causes of the sub-prime mortgage meltdown. 

Committee Chairman Harry Waxman (D-CA), in a heated exchange told the former Fed Chairman that he had "the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others, and now our whole economy is paying the price.”

Over the years, I’d thought of Ayn Rand’s work as a piece of my own intellectual development, but hadn’t really thought of her as a big force in the country’s history. Certainly, as America reframed itself, in the Nixon/Reagan years,  I often pictured the Wall Street Corporate types as figures from her books – though not in the way this article depicts. In her books, there were the heros – "rugged individualists" creatively and brilliantly outpacing their peers, not in wealth but in other ways. I saw Greenspan’s People, the Hedge Fund Managers, the Financial Elite, and the besuited executives as parasites sucking the economy dry. So I guess some of Ayn Rand’s us/them dichotomy stuck with me after all.

Ayn Rand was a Russian Immigrant, fleeing Communism – and it showed in her writing. In her hatred of the totalitarian and impersonal world she left, she flew to the other extreme – one’s self king. If it’s good for "ME," it’s good. In her books, Ayn Rand created characters unlike the real people that walk the Planet. They were moral geniuses, like heros always are in novels. And maybe Alan Greenspan is moral too. But his notion that the Wall Street regular guy has a "morality of self-interest" is beyond ludicrous. Ayn Rand became a comic character to me – as absurd and naive as the Communists she fled in Russia.

I ran across another, more heady article that elaborates on these same points. It’s a great perspective, but pedantic in the way pedants write [big words]. Here’s a taste, but I’d recommend a complete read.  It’s the one of the better comprehensive overviews of the state of things I’ve run across;

Beyond Bailouts: On the Politics of Education After Neoliberalism
Wednesday 31 December 2008
by: Henry A. Giroux and Susan Searls Giroux
t·r·u·t·h·o·u·t | Perspective

As the financial meltdown reaches historic proportions, free-market fundamentalism, or neoliberalism as it is called in some quarters, is losing both its claim to legitimacy and its claims on democracy. Once upon a time a perceived bastion of liberal democracy, the social state is being recalled from exile, as the decades-long conservative campaign against the alleged abuses of "big government" – its euphemism for a form of governance that assumed a measure of responsibility for the education, health and general welfare of its citizens – has been widely discredited. Not only have the starving and drowning efforts of the Right been revealed in all their malicious cruelty, but government is about to have a Cinderella moment; it is about to become "cool," as Prince Charming-elect Barack Obama famously put it. The idea has enchanted many. The economist and recent Nobel laureate, Paul Krugman, has argued that the correct response to the current credit and financial crisis is to "greatly expand the role of government to rescue an ailing economy," with the proviso that all new government programs must be devoid of even a hint of corruption. Bob Herbert has called for more government regulation to offset the dark cloud of impoverishment that resulted from the last thirty years of deregulation, privatization and tax breaks for the wealthiest Americans. And there are others, sophisticated thinkers all, such as Dean Baker, David Korten, Naomi Klein and Joseph E. Stiglitz, who have traced the roots of the current financial crisis to the adaptation of neoliberal economic policy, which fostered a grim alignment among the state, corporate capital and transnational corporations. Even New York Times op-ed writer Thomas Friedman has found a way to live comfortably with the idea. He wants to retool the country’s educational mainframe, teaching young people to be more creative in their efforts to build "the most productivity-enhancing infrastructure," – even as the stated goal unhappily recapitulates the neoliberal fantasy that unchecked growth cures all social ills. And a contrite Alan Greenspan, erstwhile disciple of Ayn Rand, recently admitted before a Congressional committee that he may have made a mistake in assuming "that enlightened self-interest alone would prevent bankers, mortgage brokers, investment bankers and others from gaming the system for their own personal financial benefit"…