Idolized one day, demonized the next

It is a common occurrence with sports idols and some teen idols to be demonized in the next stage of their lives. But among Fed Chairmen, Greenspan surely gets the ‘honor’ of being the first.

A scathing review of Greenspan´s latest book – The Map and the Territory – by Steven Pearlstein has led to additional acid comments by, among others Paul Krugman and Brad Delong.

PK writes “The worst ex-central banker”. It´s not just about his post-Chairman performance:

The thing is, Greenspan isn’t just being a bad economist here, he’s being a bad person, refusing to accept responsibility for his errors in and out of office. And he’s still out there, doing his best to make the world a worse place.

Brad Delong goes so far as to recant his initial review of Greenspan´s 2007 “Age of Uncertainty”:

I said Greenspan had batted about 35 out of 36 at the Federal Reserve. Adding on what we now see with respect to financial deregulation, tolerance of fraud, and reactions to the Lesser Depression since he left the Board of Governors, I now see him as batting 35 out of 42 or so–and his mistakes appear of greater magnitude than his successors(!).

But all that´s not new. Five years ago I wrote a piece for Nouriel Roubini´s EconoMonitor entitled “Fallen Idol” where I conclude:

Unfortunately, Greenspan was not an effective advocate for his own defense during his Congressional testimony. He pinned the crisis on mortgage securitizers, risk modelers and lending institutions. But his defense was really quite easy. As his own defense counsel he would argue that the Fed´s mandate is to:

1.      Keep inflation low and stable and,

2.      Attain maximum employment (equivalently, keep growth close to potential)

And then show “defense exhibit #1” (and only) to Congress´s “jury” panel: