In response to an FT article by Alan Greenspan on 17th August 2015, entitled 'Higher reserves are a less painful way to fix the banks'
Mr Greenspan and the FT could have saved themselves a lot of space here, since the purpose of this article can be found in the opening sentence:
“The US economy has just been through an unprecedented debilitating financial crisis and six years of economic stagnation. It did not have to turn out that way”
"This is nothing to do with me…I haven’t been in charge for quite a while…it was fine when I left…I only mention this now because it’s just about to come tumbling down and I feel the need to put some distance in between me and it. Thanks, The Maestro
P.S. What follows is as slippery as the Yoda like gibberish I used to spout to keep everyone thinking only a genius could babble like that”
But thankfully for us all he couldn’t leave it at that…more entertainments follow:
"Lawmakers and regulators, given elevated capital buffers, need to be far less concerned about the quality of the banks’ loan and securities portfolios since any losses would be absorbed by shareholders, not taxpayers"
Clearly there is more share capital in Mr Greenspan’s dreams than the S&P 500
But my favourite is the final flourish:
“Well-capitalised banks need to be less fettered in their primary economic function: to assist in the directing of the nation’s scarce savings to fund our most potentially productive investments. Funding cutting-edge capital investments will engender growth in national productivity and standards of living”
We haven’t had banks, well capitalised or otherwise, for over a decade – we’ve had centrally bank-funded casinos that have presided over the financial-isation of the economy. Goldman Sachs wasn’t even called a bank until it became necessary for them to be relabelled in order to get bailout money and ongoing governmental protection.
This piece is pathetic. I get it though…the Ponzi scheme is collapsing and Mr Greenspan feels the need to wash his hands. He won’t be the last...before the year is out we can expect a grand missive from Dr. Bernanke, and no doubt several other works of fiction from Mr Greenspan’s former acolytes in the land of Oz.