Alan Greenspan Posted by John on October 29, 2013

Gillian Tett has a talk with Alan Greenspan

The ‘Maestro’ admits he didn’t understand derivatives he touted; calls for bank breakups

By Ryan Chittum

The Financial Times’s Gillian Tett sits down with Alan Greenspan for a two-hour interview and gets some eye-opening admissions from the fallen “Maestro”:

What also worries Greenspan is that this swelling size has gone hand in hand with rising complexity – and opacity. He now admits that even (or especially) when he was Fed chairman, he struggled to track the development of complex instruments during the credit bubble. “I am not a neophyte – I have been trading derivatives and things and I am a fairly good mathematician,” he observes. “But when I was sitting there at the Fed, I would say, ‘Does anyone know what is going on?’ And the answer was, ‘Only in part’. I would ask someone about synthetic derivatives, say, and I would get detailed analysis. But I couldn’t tell what was really happening.”

This is simply outrageous. As Tett notes, Greenspan, who we now know didn’t understand them at all, touted the risk-dispersing benefits of derivatives as Fed chairman and fought those who would regulate them.

http://www.cjr.org/the_audit/gillian_tett_talks_to_alan_gre.php