In response to the impact of the bursting of the Internet bubble on the real economy of the United States and the terrorist attack of 9 1 1, around 200 1, the Federal Reserve continuously cut interest rates to 1% to maintain the growth rate, and a large amount of surplus capital was generated and poured into the real estate market, resulting in excessive prosperity of this market. At the same time, financial institutions were over-innovative, and various derivatives flooded, which Greenspan turned a blind eye to. Thereby burying the crisis.
Since 2004, the Federal Reserve began to raise interest rates. In less than two years, it raised interest rates 17 times in a row and reached 5.25% in mid-2006. However, in the process of raising interest rates in the United States, the rise of the US real estate market is obviously unstoppable. At this time, other Eurasian countries, such as Japan, want to make a profit by flowing into the American market because there are a lot of extra low-interest funds at home. As a result, the United States increased its profit margin, and instead of tightening the capital market, it attracted more funds to enter the American market.
Alan greenspan, former chairman of the Federal Reserve, is known as "the man who saved the world". In 2002, when his fame reached its peak, he came to England to accept the title of "Jazz". His most loyal fan, the current British Prime Minister Gordon Brown, has confirmed that Greenspan won this honor because he promoted "economic stability".
During that trip, Greenspan visited the Monetary Policy Committee of the Bank of England (BOE). He told the Committee that when the Internet bubble burst, the US financial system was very resilient. The stock price fell by half, and a large number of bonds defaulted, but no big bank failed. Greenspan praised the fact that complex derivatives spread risks. One MPC member asked: How is this possible? Someone must have suffered. Who is it? Greenspan replied with calm satisfaction: "European insurance companies."
Six years later, American International Group (AIG), the largest insurance company in the United States, was essentially nationalized to prevent it from dragging down the entire financial industry. Although gentlemen including US Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke have taken extraordinary measures to solve the problems caused by their predecessors' actions, the financial system has been permanently damaged. As Paulson said, he is now holding cards dealt by others.
(He Xun Finance Original)
Many people blame the Federal Reserve under Greenspan for causing the current chaos. They are right, but not the reason people often say. It is unfair to blame low interest rates. In the past 10 years, there is no evidence that the United States has been hurt by inflation caused by excessive growth. The economy needs low interest rates and fiscal stimulus to avoid falling into a serious recession. At this point, the Fed has done its duty.
(He Xun Finance Original)
Greenspan's responsibility is that he created a speculative bubble in the era of low interest rates. He can't claim that he didn't see the risk. Take two things that happened in the 1990s as an example. The first thing happened before 1996 he gave a speech on "irrational prosperity". At a meeting of the Federal Open Market Committee (FOMC), he admitted that there was a bubble in the stock market, but refused to take any action. He admitted that raising the margin requirement would be effective: "If we want to eliminate the bubble, whatever it is, I guarantee it will be feasible." Strangely, after that, when he defended the Fed's "inaction", he claimed in three speeches that raising the margin would not help.
(He Xun Finance Original)
The second thing happened in the spring of 1998. When the chairman of the Commodity Futures Trading Commission (CFTC) expressed concern about the proliferation of over-the-counter derivatives, Greenspan said that the introduction of new regulatory measures risked disrupting the capital market. In this crisis, OTC derivatives are the source of "counterparty risk".
(He Xun Finance Original)
At the turn of the century, with the stock price rising, more brokers are willing to lend money to investors to buy stocks. As the stock price rose, the purchase continued until the bubble burst. Creating bubbles may be considered bad luck; Making two bubbles looks like negligence. However, this is exactly what the Fed did during Greenspan's administration.
(He Xun Finance Original)
After the stock market suffered losses, Americans turned to buying houses. The mortgage industry uses securitized bonds to ensure that lenders don't have to worry about being unable to repay; Package the risk and resell it to others. Greenspan did not stand by this time. He has repeatedly said that buying a house is a safe investment because house prices will not fall. Homeowners can wait until any downturn ends. Is it any wonder that so many people think that "since all world-class financial geniuses hold this view, it must be true"?
(He Xun Finance Original)
Even when things became stark raving mad, Greenspan refuted those who warned that a new bubble was forming, claiming that there were only a few "floating bubbles" in a few areas. Later, it was not until two years after Greenspan left office in 2007 that he admitted that "floating foam" was his euphemism for "bubble". Like the stock market bubble, the fault this time is not that the interest rate is set too low, but that the mortgage institutions are extremely reckless. In fact, any lending institution will be encouraged by his speech in April 2005: "In the past, applicants with poor qualifications could not get loans at all. Now, the lending bank can effectively judge the relevant risks of each applicant and properly evaluate the risks. This improvement has led to a rapid increase in the issuance of subprime mortgages. " As he said, subprime loans did grow rapidly.
(He Xun Finance Original)
Greenspan was responsible for the supervision and management of most aspects of the banking industry for 20 years. The Fed claims that its responsibility is to ensure "the safety and soundness of the banking industry". Other regulators should have stepped in-the regulatory structure in the United States has not kept pace with the changes in the market. But considering the importance of the personal status of the Federal Reserve and Greenspan, who would have thought that the Federal Reserve would use its limited power to ensure a closer inspection of the situation at that time?
(He Xun Finance Original)
Greenspan realized that something great had happened at the moment and described it as a once-in-a-century event. However, you can't meet people like Greenspan every day. (Source: Fortune Times)
(He Xun Finance Original)
There are major defects in the American financial supervision system.
(He Xun Finance Original)
Excessive packaging of subprime-related derivatives and excessive financial leverage of financial institutions are important features of this financial crisis, but this cannot deny financial innovation, which is still an important driving force for contemporary financial and economic development. There is nothing wrong with financial innovation itself. The key is whether financial supervision can keep up. Within the scope permitted by law, the pursuit of profit maximization is the legitimate pursuit of investors and entrepreneurs. If American financial supervision was in place, high-risk subprime loans and their financial derivatives would not have developed to such a large scale in today's market, and the leverage of American financial institutions would not have reached such a high level. Therefore, it is biased to blame the subprime mortgage crisis on "shameless greed of Wall Street investment bankers", or it may be that the White House is looking for a "scapegoat" to shirk its responsibility.
(He Xun Finance Original)
The main source of the subprime mortgage crisis lies in the major defects in the financial supervision system of the United States, which failed to keep up with the development of financial situation and financial innovation in time. The main reasons are as follows:
(He Xun Finance Original)
1. 1999 "Financial Services Modernization Act" marks that the American financial industry has entered the era of mixed operation. However, up to now, the United States still implements separate supervision, and there are as many as seven financial supervision institutions. If institutions with certain supervisory functions are included, there will be more supervisory institutions. Insurance companies, commercial banks and investment banks are supervised by different government agencies. There are many different types of institutions involved in the securitization of subprime mortgage, which requires a high degree of coordination and cooperation among various regulatory agencies. If the regulatory agencies are too complex, there will be coordination problems and regulatory loopholes will be more likely to occur.
(He Xun Finance Original)
Second, the financial supervision system in the United States was formed in the era of separate operations, and the focus is still on institutional supervision. Since the implementation of mixed operation, the financial market in the United States has developed rapidly, financial innovations have emerged one after another, products have become increasingly complex, and capital liquidity has been great. Undoubtedly, functional supervision should become the main body of financial supervision. However, functional supervision in the United States is weak. Although the securities and futures markets are supervised by the Securities and Exchange Commission and the Commodity Futures Trading Commission, the supervision is relatively weak. Judging from the supervision of the whole financial system, there is almost no supervision over the activities of financial institutions except investment banks in the securities market. Institutional supervision has the characteristics of only recognizing the nature of institutions and not recognizing business. Functional supervision is based on different financial businesses, and no matter what institutions carry out a certain business, they all adopt the same supervision standards.
(He Xun Finance Original)
Third, over-the-counter (OTC) derivatives are developing too fast and the supervision is lagging behind. Generally speaking, there is basically no problem with derivatives traded on the floor market. In contrast, subprime-related derivatives are not listed on the exchange, and product standards are not uniform. If the development is too fast and the supervision can't keep up, problems will easily occur.
(He Xun Finance Original)
Fourth, financial derivatives are a double-edged sword, and correctly using their functions of price discovery and hedging can play a role in avoiding risks; But if speculation is excessive, financial derivatives will bring unpredictable risks. In recent years, due to poor supervision, there is obvious excessive speculation in related derivatives such as subprime loans. (Source: Xinhuanet)
(He Xun Finance Original)
Greenspan pleaded guilty: he once opposed the government's strengthening of financial supervision.
(He Xun Finance Original)
Former Federal Reserve Chairman Alan Greenspan123 denied that the US financial crisis was due to his policy mistakes, but admitted that the occurrence of the crisis proved that some of his economic concepts were wrong. He admitted for the first time that the unregulated free market was flawed.
(He Xun Finance Original)
At the congressional hearing on the 23rd, under the repeated questioning of members, Greenspan said helplessly. "This shocked me, because in the past 40 years, there is a lot of strong evidence that the free market system has worked very smoothly."
(He Xun Finance Original)
Greenspan served as chairman of the Federal Reserve from August 2007 1987 to October 2006165438+10. At that time, he kept his word and resolutely opposed the government's strengthening of financial supervision. In May 2005, Greenspan put forward a famous conclusion that self-regulation of financial markets is more effective than government regulation.
(He Xun Finance Original)
More than three years later, Greenspan finally admitted that his position against the regulation of financial derivatives during his tenure as chairman of the Federal Reserve was "partially wrong". He said bitterly that the Fed didn't know the scale of the subprime mortgage market until 2005, and financial institutions didn't try their best to protect shareholders' interests as he expected.
(He Xun Finance Original)
"We can't expect perfection, especially in those areas that need to be predicted. We do our best, but we can't expect perfection, "Greenspan argued at the hearing. "The Fed's expectation of the law of economic operation itself is an inaccurate science. If our prediction is 60% accurate, it means that we still have a 40% chance of making mistakes. "
Greenspan believes that banks will do their best to protect the interests of shareholders for their own interests. In addition, he has always denied that the five-year real estate boom led to a large number of speculative bubbles, but insisted that house prices could not fall sharply across the country. These views are also flawed. He said that he failed to foresee the sharp drop in house prices because the United States had never experienced anything like it. "The current crisis shows that it is much wider than I thought."