By the time Alan Greenspan left the Federal Reserve in 2006 after
18 years as chairman, he was almost sainted by many in the financial
No longer. The subprime mortgage crisis has pummeled his
"It's hurting him," says David Wyss, chief economist of Standard
& Poor's, a financial information service in New York. "He didn't
solve all the problems of the world. He didn't walk on water. But he
swam pretty well."
Of course, the hindsight of critics can often be better than
On the monetary policy side, for instance, some critics don't
recall the mental atmosphere in 2001 when Mr. Greenspan's Fed cut a
key interest rate to about 1 percent and kept it there until 2004.
Many economists then were worried about the possibility of a
depression or a 10-year economic stagnation like that which had hit
Maybe the Fed should have raised that rate sooner, suggests Mr.
Wyss, possibly diminishing the size of the recently burst housing
price bubble. But that action might also have led to "a deeper and
longer recession," he adds.
Regardless, the criticism of Greenspan is now shifting away from
monetary policy to what's seen as the central banker's weakness on
the regulatory side.
"Greenspan's a libertarian," says Charles McMillion, head of MBG
Information Services in Washington. "He's opposed to regulation by
background ... and got away with it for the most part during his
tenure. I was always just astonished at his lack of interest in the
regulatory role of his job."
Other economists make similar jabs.
"There was a horrible failing of regulation in the last six years
or so," says Dean Baker, codirector of the Center for Economic and
Policy Research in Washington. He says Greenspan should have used
the Fed's powerful regulatory and supervisory functions in the
financial area to deflate such bubbles as soaring stock market
prices in the 1990s and the housing bubble.
The Fed's financial regulators and others did meet in August 2005
to look at slipping credit standards in the mortgage industry,
recalls Harald Malmgren, a Washington economic consultant. But
neither Greenspan, nor his academic-inclined successor, Ben
Bernanke, made any regulatory moves to stem the rampant greed in the
That is, until last Tuesday when the Fed proposed changes in the
Truth in Lending regulations "to protect consumers from unfair or
deceptive home mortgage lending and advertising practices."
"There is no excuse for them taking so long," says Mr. …