YOU JUST LEARNED THIS?!?' - Jon Stewart Struggles To Understand How Former Fed Head Greenspan Missed Wall Street 'Screwiness
Greenspan argued that, prior to the crisis, he thought banks would be better stewards of their own capital (and that tighter capital restrictions could have helped prevent the crisis).
"Isn't it because they don't pay the penalty? The rewards that they were getting," Stewart asked. "The system was incentivized for these crazy short-term bursts of rewards."
"We really can't forecast all that well and yet we pretend that we can but we really can't," Greenspan told Stewart of the markets. "Markets do very weird things because it reacts to how people behave and sometimes people are a little screwy."
"You just learned this?" a dumbfounded Stewart responded.
Stewart was getting to the heart of the major criticism of Greenspan's new book - that he seems to exonerate himself from creating the conditions in which a mega crisis could germinate. As the New York Times' Binyamin Appelbaum wrote in a book review, "[Greenspan] does not explain that under his leadership, the Fed played the lead role in creating rules that let banks set their own capital levels, with predictable results."
Watch the two-part interview: