Alan Greenspan is simply nuts. He's always been against regulating derivative trading for better or for worse, but his reasoning is batshite insane. From the NY Times:
The problem is not that the contracts failed, he says. Rather, the people using them got greedy. A lack of integrity spawned the crisis, he argued in a speech a week ago at Georgetown University, intimating that those peddling derivatives were not as reliable as “the pharmacist who fills the prescription ordered by our physician.”
...
“It seems superfluous to constrain trading in some of the newer derivatives and other innovative financial contracts of the past decade,” Mr. Greenspan writes. “The worst have failed; investors no longer fund them and are not likely to in the future.”
In his Georgetown speech, he entertained no talk of regulation, describing the financial turmoil as the failure of Wall Street to behave honorably.
“In a market system based on trust, reputation has a significant economic value,” Mr. Greenspan told the audience. “I am therefore distressed at how far we have let concerns for reputation slip in recent years.”
Um.... see, that's what laws and regulations are for. It's why we have laws against stealing and murder and rape - it would be all well and good to just assume that people will act responsibly and in the interest of society knowing that in the end it will benefit them as well. But as we all know, people can be evil and so we can't just trust everyone. That's why we have laws and regulations. Duh.
Our jails are full of people who "failed to behave honorably". I wonder if Greenspan thinks we don't need burglary laws either. I want to see him tell the guy who breaks into his home how distressed he is that he let his reputation slip.
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