Greenspan's analyses.(EDITORIALS)

Article excerpt


Notwithstanding his exemplary management of both growth and recession, Fed Chairman Alan Greenspan has arguably best acquitted himself during three crises that truly threatened the world economy: the 1987 Black Monday stock market collapse; the 1998 Asian-Russian meltdown, which was exacerbated by the implosion of a major U.S. hedge fund; and the aftermath of September 11, when immediate action by the Fed prevented a devastating liquidity crisis. With a record like that and in the current climate of downward-spiraling investor confidence, it's no wonder that markets, politicians, workers and investors eagerly awaited his semi-annual visit last week to Capitol Hill.

Alluding to a couple of Mr. Greenspan's more descriptive phrases - "an outsized increase in opportunities for avarice" and "infectious greed" - the New York Times headline screamed "Fed Chief Blames Corporate Greed," a notion Democrats were only too happy to embrace. But Mr. Greenspan said far more than just that. He observed, for example, that in "too many cases" there was a general breakdown among the "many bulwarks safeguarding appropriate corporate evaluation," including "lawyers, internal and external auditors, corporate boards, Wall Street security analysts, rating agencies and large institutional holders of stock," all of whom "failed for one reason or another." He could have added journalists. Moreover, Mr. Greenspan also noted that the "corporate governance and business transparency problems" contributing to the run on equities "evidently accumulated during the earlier rapid runup in these markets." That period, of course, coincided with the Clinton-Gore administration; the problem worsened significantly after Mr. Greenspan himself warned of "irrational exuberance" in December 1996. …