Greenspan & Kanjorski Interviews on CNBC This Morning

CNBC's morning program from 6-9AM had an hour-long session featuring former Fed chairman Alan Greenspan.

These days, in the wake of the financial crisis which Greenspan's Fed's easy money policies helped create, any appearance by him is essentially an attempt to rehabilitate himself.

This morning was no different.

Among Greenspan's interesting remarks, though, were these.

Only now, after so many years at the helm of the Fed, he declares that the manner of financial sector regulation hasn't worked, and won't worked. I can't recall the exact words he used, but the former Fed chairman said something very close to,

'The best form of regulation is counterparty regulation.'

Meaning that all agency activities pale in comparison to the simple monetary vote by a counterparty to trade with, buy from or sell to a financial entity.

He went on to dismiss, out of hand, the recent FINREG bill as being written by a bunch of inexperienced, junior Congressional staffers with no sense of financial history or understanding of the implications of what they have wrought, stressing massive unintended, unanticipated consequences.

Through this particular remark, Greenspan implicitly derided Congress for having no direct role in writing or understanding the overly-complex bill. A bill, Greenspan intoned, would surely be re-written in another year, when the terrible consequences of this one have begun to become apparent.

When asked about the causes of the financial crisis, Greenspan punted and contended that we don't yet know. Of course he'd say this, because he desperately wants to now distance himself from the Fed's role under his chairmanship.

He was emphatic about economists' and regulators' inability to correctly identify and act upon bubbles-in-progress. And provided some convincing examples.

Despite his self-interest, I genuinely believe Greenspan's assertions that current regulatory approaches, no matter how differently dressed up, won't work any better in the future than they did in the past. He clearly recommended less governmental regulation, leaving more responsibility to counterparties, so they would take more seriously their commitment of capital at risk with their trading partners.

Following this rather interesting hour was a condensed period of about 5 minutes of outright lies from Pennsylvania's Democratic Representative Paul Kanjorski. This Congressman is a favorite liberal of the CNBC network, and is generally given a complete pass by the anchors from answering any tough questions, explaining his involvement in a rather serious, large-scale financial scandal, or really ever being accountable for his prior words or actions.

This morning, however, was a bit different. Two anchors assailed Kanjorski for the FINREG bill's complete absence of any mention of Fannie and Freddie.

His retort became a full-blown, purely political diatribe. All lies, by the way.

First, he claimed that Fannie and Freddie were in the bill by implication, because no financial institutions would ever be allowed to claim taxpayer cash, or become "too big to fail."

He then claimed that he had personally worked for nine years on underwriting standards, so he knew all about the mortgage industry, and that the cause of the problems were banks, not Fannie or Freddie.

Joe Kernen managed to ask a hardball question, inquiring how Congress, which had failed in its role, if it is its role, in oversight of the sector, would now, as a body make the correct estimation of when a financial institutions needed to be seized and liquidated.

Kanjorski then evaded this question by replying that the real failures of regulation occurred during 'ten years of Republican control of the White House and Congress,' but then said he didn't really blame them.

According to Kanjorski, the only reason Fannie and Freddie grew out of control was because of George W. Bush and a Republican Congress, who, according to the Democrat, did nothing to stop them. But, then, according to him, the Democratic-controlled Congress did move to put them under Treasury control, which, to him, I guess meant being regulated. Last time I looked, Treasury Secretary Geithner issued both GSEs a midnight, Christmas Eve reprieve to run unlimited losses at taxpayer expense.

It's true that Bush pushed for an 'ownership society,' which was misguided for low-end income families. But both Bush and his predecessor, Clinton, favored low-income home buying policies, leading to the problems we are now addressing.

This isn't true. It's a fact that Bush's administration pushed for tight limits on the two GSEs, but nobody in Congress would budge. This is because the two mortgage giants, as I noted in this post, have become like the old Banks of the United States, using federal money to grease so many Congressional palms, in various ways, that no majority of either party will touch them.

You couldn't have had two more divergent appearances this morning on CNBC's program. Greenspan dispensing some unvarnished, sensible insights, and Kanjorski simply lying about the past and rewriting history to absolve himself and other Congressional members and past presidents of all responsibility for starting the housing-related financial meltdown by letting Fannie and Freddie grow out of control.