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Series: Road to ruin
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Road to ruin
Twenty-five people at the heart of the meltdown ...
The worst economic turmoil since the Great Depression is not a natural phenomenon but a man-made disaster in which we all played a part. In the second part of a week-long series looking behind the slump, Guardian City editor Julia Finch picks out the individuals who have led us into the current crisis

Poll: Who led us down the Road to Ruin?
Comments (136)

    * Julia Finch, with additional reporting by Andrew Clark and David Teather
    * The Guardian, Monday 26 January 2009
    * Article history

Greenspan Testifies At Senate Hearing On Oil Dependence

Former Federal Reserve chairman Alan Greenspan, who backed sub-prime lending. Photograph: Mark Wilson/Getty Images

Alan Greenspan, chairman of US Federal Reserve 1987- 2006
Only a couple of years ago the long-serving chairman of the Fed, a committed free marketeer who had steered the US economy through crises ranging from the 1987 stockmarket collapse through to the aftermath of the 9/11 attacks, was lauded with star status, named the "oracle" and "the maestro". Now he is viewed as one of those most culpable for the crisis. He is blamed for allowing the housing bubble to develop as a result of his low interest rates and lack of regulation in mortgage lending. He backed sub-prime lending and urged homebuyers to swap fixed-rate mortgages for variable rate deals, which left borrowers unable to pay when interest rates rose.

For many years, Greenspan also defended the booming derivatives business, which barely existed when he took over the Fed, but which mushroomed from $100tn in 2002 to more than $500tn five years later.

Billionaires George Soros and Warren Buffett might have been extremely worried about these complex products - Soros avoided them because he didn't "really understand how they work" and Buffett famously described them as "financial weapons of mass destruction" - but Greenspan did all he could to protect the market from what he believed was unnecessary regulation. In 2003 he told the Senate banking committee: "Derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn't be taking it to those who are willing to and are capable of doing so".

In recent months, however, he has admitted at least some of his long-held beliefs have turned out to be incorrect - not least that free markets would handle the risks involved, that too much regulation would damage Wall Street and that, ultimately, banks would always put the protection of their shareholders first.

He has described the current financial crisis as "the type ... that comes along only once in a century" and last autumn said the fact that the banks had played fast and loose with shareholders' equity had left him "in a state of shocked disbelief".

ATG wrote:

So what, is he worse?

Kmarion wrote:

Turquoise wrote:

ATG wrote:

So what, is he worse?

Bernanke is worse than Greenspan, because at least Greenspan had some redeeming moments.

You mean like when he was criticized the system he helped to create (after he retired)? Give Bernanke a chance, maybe when he exits he will acknowledge how bad he fucked us over.

Turquoise wrote:

uevjHEYFFQ wrote:

Eh good for the Chinese.

Yeah sucks for everyone but the Chinese, but if we were in their position and had done it you can't deny you wouldn't have supported it.

The Chinese are pretty clever.  Eventually though...  they're going to have some problems when their people start demanding more from their government.