Economist Jeffrey Sachs Rails Against Alan Greenspan
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Tue Oct 06 15:57:41 2009 EDT
By Kelly Evan
Of THE WALL STREET JOURNAL
Jeffrey Sachs, a prolific economist, author and professor at Columbia
University, had unusually harsh words in his speech Tuesday directed at Alan
Greenspan, former chairman of the Federal Reserve - placing him with much of
the blame for the current financial crisis.
"The essence of the current downturn is finance," Sachs said in a speech at
the World Business Forum in New York. "It's a Wall Street crisis. A crisis made
down the block." He said, and "if you look under the rubble you can figure out
what happened and why."
First, "a long bout of easy credit championed by Alan Greenspan and the Fed
outside of the normal boundaries of monetary policy," which came together with
"a nearly complete deregulation of the financial sector contrary to almost
everything we know about the risks of a highly leveraged financial system."
"This is flagrant irresponsibility," he said. "This isn't a matter of one's
market philosophy, just profound irresponsibility." Later, though, he said
Greenspan's ideology was possibly at fault, given his "Ayn Rand" philosophy
that markets take care of themselves "until he discovered the flaw of his
theory later."
(This story and related background material will be available on The Wall
Street Journal Web site, WSJ.com.)
Sachs also spoke harshly of the Clinton and Bush administrations. "We arrived
at this cliff through the aggressively irresponsibility of two U.S.
administrations in a row," he said, accusing them of bending to the will of the
nation's biggest lobbying group - the financial industry.
"Where were the regulators? Consciously and deliberately kept out of the
scene," he said. "This led to a bubble financially that was most notable in the
housing sector...and Alan Greenspan added fuel to the fire by keeping interest
rates around 1%" from 2002 through early 2005.
"You get credit for stopping a Depression but I don't want to give too much
credit because the people who stopped it were the people who started it also,"
said Sachs. |
