When Andrea Mitchell reports on the current financial crisis—or on anything that relates to the crisis, which is, these days, a lot—there is an excessively large elephant in the control room. Its name is Alan Greenspan.
That Greenspan is Mitchell’s husband doesn’t, under normal circumstances, warrant disclosure or special treatment. Mitchell is a career journalist who knows what conflict of interest is—and how to avoid not only its appearance, but also, one hopes, its effects. Under normal circumstances, it would be unfair to hold her husband against her.
Under normal circumstances. But the credit crisis—and the current meltdown we’re facing, whose effects, assuming we can find a way to stanch them in the short term, will likely be with us for generations to come—is not normal circumstances. Greenspan, by virtue of his nearly-nineteen-year chairmanship of the Federal Reserve Board, is, to some extent, culpable in the crisis we’re facing. Critics have accused the Greenspan-led Fed of inflating the housing bubble by keeping loan rates too low for too long, encouraging reckless lending and borrowing. Greenspan himself has admitted as much, telling CBS last year, “While I was aware a lot of these practices were going on, I had no notion of how significant they had become until very late. I really didn’t get it until very late in 2005 and 2006.” And as The New York Times put it in a December 2007 article headlined “Fed Shrugged as Subprime Crisis Spread” (emphasis mine),
Until the boom in subprime mortgages turned into a national nightmare this summer, the few people who tried to warn federal banking officials might as well have been talking to themselves.
Edward M. Gramlich, a Federal Reserve governor who died in September, warned nearly seven years ago that a fast-growing new breed of lenders was luring many people into risky mortgages they could not afford.
But when Mr. Gramlich privately urged Fed examiners to investigate mortgage lenders affiliated with national banks, he was rebuffed by Alan Greenspan, the Fed chairman.
The degree of Greenspan’s culpability in the current meltdown is certainly debatable. One could argue, as he does, that its root cause wasn’t the interest rates of the mortgages themselves, but their repackaging. What isn’t debatable, though, is the fact that, as chairman of the body that presided over the economy while it began its slow-before-sudden descent into Dante-conomic hell, the legacy of Greenspan’s Fed chairmanship is intimately entwined in the crisis. (If the awkward evasiveness he and Mitchell exhibited at the opening-night gala for the New York Philharmonic last week is any indication, the couple is acutely aware of that.) The oft-repeated comparison of the credit meltdown to September 11 is flawed in many respects, but it’s valid in the sense that we had warning signs of this crisis long before it exploded last week. There’s a reason that “asleep at the switch” has become a truism in the treatments of the crisis; and one of the people manning that switch was Alan Greenspan.