"Greenspan: Worst Crisis Since World War II"

[Petey of Lone Tree]

The SOTT newspage is currently carrying a Financial Times article by Alan Greenspan entitled Greenspan: Worst Crisis Since World War II.

Perhaps readers should be aware of the following article about Greenspan located at _http://www.davemanuel.com/2008/01/16/alan-greenspan-working-as-an-advisor-for-paulson-co-thats-just-wrong/
(bold emphasis by me):

Of all of the thousands of hedge funds that Alan Greenspan could have taken an advisory position with, he had to choose Paulson & Co., the hedge fund that made billions and billions of dollars in 2007 betting against the US housing market?

Alan Greenspan, one of the chief architects of the housing boom (which is now deflating at an alarming rate), working at a firm which is still actively placing bets against the US economy and being very public about it?

It just seems like a very strange choice to me. I understand that Alan Greenspan served for many years and deserves his chance to make money in the private sector. The problem I have is that Greenspan already works for Pimco and Deutsche Bank, and presumably makes buckets of money on the speech circuit. Why sully your legacy by taking this advisory role? Either he: a) doesn't care about his legacy or b) didn't really think this through. Maybe he wasn't aware that Paulson & Co had been aggressively betting against the US housing market, especially the subprime mortgage index? Maybe he didn't do his due diligence? It's a possibility, but I doubt it. I am sure that Greenspan has people that advise him on such things who did a thorough screening of Paulson & Co.

Many people blame Greenspan for the current mess that we are in. They say that interest rates were far too low in the first part of this decade, and that created the massive housing bubble that started in 2001 and peaked in 2005. So for Greenspan to take a position at a firm that made so much money profiting from the bursting of the housing market bubble seems questionable to many. At the very least, the accepting of this position is in bad taste (in my opinion.)

Like I said, Greenspan served as the Chairman of the Federal Reserve for almost twenty years and should be able to work wherever he wants to in the private sector. However, he obviously wasn't thinking about his image when he accepted this job at Paulson & Co. Maybe they offered him a pile of money and he suddenly succumbed to some "irrational exuberance" of his own.

Maybe Paulson & Co. giving Greenspan the position was their way of saying, "Attaboy!"

 

[Rick]

Thanks for the heads up. Found this article from CNN:

Greenspan’s masterful timing
http://dailybriefing.blogs.fortune.cnn.com/2008/01/15/greenspans-masterful-timing/

 

[Rabelais]

Its probably a bit more complex than this, but this fit the Occam's razor approach. Nicknamed "Easy Al" for his wide open style of bubble creating, with unlimited fiat paper pumped into the lending institutions, Greenspan created the housing bubble to replace the burst tech bubble. Since bubbles pop and the housing market writing was on the wall, "Easy Al" retired just in time to hand off the stinking situation to "Helicopter Ben" Bernanke, who obviously wishfully thought that the party could be sustained indefinitely... and he could become a Fed legend too.

Does anyone remember Greenspan urging lower income potential home buyers to take advantage of the adjustable rate mortgages being offered to anyone who could fog a mirror? I do.

John Alfred Paulson (no relation to Hank), being a clever fellow, saw immediately the inevitable outcome of this debacle and proceeded to short the housing market, making an obscene lot of money in the process.

Queens-born John Paulson makes fortune on home foreclosures

BY DAVE GOLDINER
DAILY NEWS STAFF WRITER

Wednesday, January 16th 2008, 4:00 AM
John Paulson East/Reuters

John Paulson

John Paulson made billions betting that you could lose your home.

The Queens-born hedge fund titan scored big by making complex investments that would reap huge profits if housing prices drop and mortgage foreclosures rise.

As the housing market tanked, Paulson made $2.7 billion in the first nine months of 2007 to lead all hedge fund bosses.

Things are looking even better for him in '08 as real estate prices crumble and millions of Americans struggle to stay in their homes.

"I've never been involved in a trade with such unlimited upside," Paulson, 52, boasted to The Wall Street Journal.

The publicity-shy Paulson, who is not related to Treasury Secretary Henry Paulson, eschews the workaholic Wall Street ethos and tries to get home to his $15 million townhouse on the upper East Side in time for dinner.

He has a brother and two sisters. His parents lived in Forest Hills until his dad, Alfred Paulson, died in 2002.

"My son John is an important person, but I really don't have anything to say about it," said his mother, Jacqueline, 81, who lives in New England.

Despite his regular New Yorker roots, Paulson made his biggest splash as a prophet of doom for American homeowners.

"Mortgage experts were too caught up" in their own happy talk, Paulson told The Journal.

Perhaps feeling twangs of compassion, Paulson donated $15 million to a nonprofit group that helps troubled homeowners keep their homes.

His funds jumped by up to 600% last year. And the sultan of subprime predicts there's plenty of cash to be made by betting house prices will plunge further.

"It's still not too late," he crowed.

http://www.nydailynews.com/money/2008/01/16/2008-01-16_queensborn_john_paulson_makes_fortune_on.html

Rewarding Greenspin for creating the system which Paulson and Co exploited just seems the "right thing" to do, eh. I would probably think that there had been collusion between the two, but for the fact that many savvy investors accurately predicted the dismal outcome of the "red hot housing and mortgage market"... almost from its infancy. No doubt Paulson and Co will use Greenspan for gaining entree into circles where they could never move on their own. They certainly didn't hire the man for his brains.

To call Greenspan a brilliant economist is akin to calling W a great statesman. He was a humbug who carried water for the banksters.... but when he had the media and the global markets hanging on his every word he seemed to have begun to believe his own hype. I have read that his own investment firm had lost all of its clients and was bankrupt when he was given the Fed position. That is hearsay, but given the mess he created with the economy it is believable. Not because he cocked it up, but because he was so desperate for fame and respect that he would unquestioningly follow the orders of those who designed this economic collapse. "Easy Al" will be a good fit with the psychopaths at Paulson and Co.

Everyone should, at least once, to try to listen to one of his old word salad Fed announcements. Whatever brilliance anyone saw in the man's leadership escaped me.

 

[cubs2626]

a) doesn't care about his legacy or b) didn't really think this through. Maybe he wasn't aware that Paulson & Co had been aggressively betting against the US housing market, especially the subprime mortgage index? Maybe he didn't do his due diligence? It's a possibility, but I doubt it. I am sure that Greenspan has people that advise him on such things who did a thorough screening of Paulson & Co.

i think it's not b) because Greenspan isn't a stupid boy who would be such a fool.... it would be very interesting to know what he was exactly consulting? it's just like Greenspan spoke about the french property market in a (paid) speech. after that every newspaper in France wrote about a crisis.

i think greenspan is just overrated. he has the power the set the agenda but he does not know much more than an average investment banker!