Today's committee session was scheduled to hear from three men, all of whom should know a thing or two about oversight in the elevated world of high finance: former Federal Reserve Chairman Alan Greenspan, former Treasury Secretary John Snow, and Security and Exchange Commission Chairman Christopher Cox. All three of these men are free market ideologues, which means that, at least on principle, none of them are particularly comfortable with the recent revival of Keynesianism or the need to reassess regulatory policies. According to the Al Jazeera English report of the session's proceedings, Waxman had no problem with cutting to this ideological core in addressing all three of these men:
Our regulators became enablers rather than enforcers. Their trust in the wisdom of the markets was infinite. The mantra became that government regulation is wrong. The market is infallible.
If Waxman was looking for contrition, he may have been satisfied with Greenspan's testimony:
Greenspan, who headed the central bank for more than 18 years, said that he and others who believed that lending institutions would do a good job of protecting their shareholders are in a "state of shocked disbelief".
His critics charge that Greenspan left interest rates too low in the early part of this decade, spurring an unsustainable housing boom which went largely unregulated.
Greenspan admitted that he had "found a flaw" in his free-market ideology.
"Yes, I found a flaw. 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," he said.
Greenspan said he had also been "partially" wrong in his opposing the regulation of derivatives in recent years.
Ironically, Greenspan's reversal brings to mind one of my favorite stories about John Maynard Keynes: The story goes that, during a heated debate one of Keynes' colleagues accused him of changing his mind on a particular issue. Keynes is said to have replied, "When I encounter new data that refute my position, I change my position. What do you do when you encounter new data?" It appears that Greenspan is at least willing to admit that he has "encountered new data;" but he is no longer in a position to do anything more than let others know that those data were strong enough to force him to change his position. The more critical question is what those with the power to act will do with those same "new data;" and the actions we have witnessed thus far have not been particularly promising.