Alan Greenspan was once known as The Maestro, but not any more. The former chairman of the federal reserve is now being partially blamed for his role in causing the troubled economy. Greenspan appeared before the House Oversight and Government Reform Committee to answer questions. 

The Washington Post reported that Greenspan sometimes defended his role in the crisis, but did allow that he had made some mistakes. For example, he told Chairman Waxman that he felt that he was partially wrong not to recommend the regulation of the derivatives market. 

In the past, Greenspan was credited with aiding the economy through use of economic tools such as cutting interest rates. The lowering of interest rates in turn fueled the housing bubble which was a major contributor to the financial crisis within the United States. 

Of course, hindsight is 20/20 and as I mentioned before, some of the same people who were claiming that Greenspan was a financial genius are blaming him today. One economist quoted by the Washington Post said that manipulating the interest rates wasn’t the correct way to work with bubbles is through regulation, and not monetary policy. It’s always much easier to point fingers afterwards. 

Greenspan’s biggest admission was that he made a mistake in trusting the banks to take care of the interests of their shareholders; from what I read, this sounds as if it was one of his biggest regrets.

That said, it’s hard to imagine that Greenspan was really naive enough to imagine that the banks wouldn’t take advantage of their customers; banks and financial institutions are not known for having consciences and Greenspan is not, nor has ever been known for being stupid. 

Then again, it’s also hard to imagine that one person could solely be responsible for crumbling the worlds’ economy. The financial institutions were obviously allowed to et away with too much in regard to the sub-prime mortgage crisis and it’s clear that Greenspan didn’t take the right tack in regards to regulation, but I think that the House Oversight and Government Reform Committee more than likely has other fish to fry than Alan Greenspan. 

It would be nice to see some of the financial institutions penalized for their actions during the financial crisis, but that might not be such a realistic wish.