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Hillary's Dubious Praise For Greenspan

Via Avi Zenilman at The Politico, I see Hillary has recommended that Alan Greenspan serve on a "high-level working group" on the mortgage crisis. She made the recommendation during an interview with the Phildelphia Daily News editorial board (yesterday, I think). Here's how one of paper's bloggers recounted it:

So the Daily News asked, why Greenspan, that wasn't he off-base on the housing bubble, and here was her response:

"Not only that, but the Fed didn't act while he was there. But he has a calming influence still to this day on Wall Street -- don't ask me why because I never understand what he's saying -- but nevertheless people respond to that Delphic oracle approach. I think it would be wise to include him. And recently he's come out and vert smartly so that we have to deal with housing and maybe we need to have some kind of buyout mechanism for mortgages. So he's moved on his understanding and depth of the problem -- but you know you could pick three others. You just have to have some demonstrable involvement of presidential leadership...* [emphasis in original]

Of course Clinton's right that Greenspan seems to have a calming influence on financial markets. (For reasons that aren't clear to me either.) And it's good to hear that she thinks Greenspan really whiffed when he had a chance to tighten regulation of the housing market. But, given that, I don't quite understand the rationale for appointing him to such a working group. If anything, his recent comments on the financial crisis have been pretty disconcerting to anyone who thinks the lack of regulation was a problem. In fact, he's basically argued that over-regulation was a cause of the recent turmoil, and that further regulation would be a mistake. Unlike Clinton, I don't think he's moved much on his understanding of these things at all.

*It would be nice to see the full transcript here--I couldn't find it--but this seems to be the gist.

Update: I don't think that Greenspan op-ed in the Financial Times (from the Plank item I linked to above) is still free online. Here are the relevant passages:

The crisis will leave many casualties. Particularly hard hit will be much of today's financial risk-valuation system, significant parts of which failed under stress. 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. But I hope that one of the casualties will not be reliance on counterparty surveillance, and more generally financial self-regulation, as the fundamental balance mechanism for global finance.

The problems, at least in the early stages of this crisis, were most pronounced among banks whose regulatory oversight has been elaborate for years. To be sure, the systems of setting bank capital requirements, both economic and regulatory, which have developed over the past two decades will be overhauled substantially in light of recent experience. Indeed, private investors are already demanding larger capital buffers and collateral, and the mavens convened under the auspices of the Bank for International Settlements will surely amend the newly minted Basel II international regulatory accord. ...

In the current crisis, as in past crises, we can learn much, and policy in the future will be informed by these lessons. But we cannot hope to anticipate the specifics of future crises with any degree of confidence. Thus it is important, indeed crucial, that any reforms in, and adjustments to, the structure of markets and regulation not inhibit our most reliable and effective safeguards against cumulative economic failure: market flexibility and open competition.

--Noam Scheiber