Greenspan: “certainly illegal and fairly criminal”

At the Fed’s Return to Jekyll Island Forum last week, Greenspan had some eye-opening comments (emphasis mine):

There are two fundamental reforms we need – to get adequate capital and, two, to get far higher levels of enforcements of statutes of fraud statutes, existing ones. I’m not even talking about new ones. Things were being done which were certainly illegal and fairly criminal in certain cases. Fraud, fraud is a fact. Fraud creates very considerable instability in competitive markets. If you cannot trust your counterparties, it won’t work. And indeed, we saw that it didn’t. –Alan Greenspan, Nov. 9, 2010

I don’t need to point out — but I will — that 1. these comments would have been somewhat more useful two, four, or eight years ago, along with some accompanying action, and 2. how about naming some names?

I really have no doubt that he was constitutionally unable to see the fraud back then. The human capacity for self-delusion is almost infinite. This doesn’t really exculpate him, of course. Explanation, not excuse.

Update 11/16: Bill White’s comment below prompted me to Google this up, from Stanford Magazine:

“Well, Brooksley, I guess you and I will never agree about fraud,” Born, in a recent interview, remembers Greenspan saying.

“What is there not to agree on?” Born says she replied.

“Well, you probably will always believe there should be laws against fraud, and I don’t think there is any need for a law against fraud,” she recalls. Greenspan, Born says, believed the market would take care of itself.

For the incoming regulator, the meeting was a wake-up call. “That underscored to me how absolutist Alan was in his opposition to any regulation,” she said in the interview.