Greenspan’s Ideological Mistake

I made a mistake in assuming the the self interest of organizations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms, and it’s been my experience, having worked both as a regulator for eighteen years and similar quantities in the private sector, especially ten years at a major international bank, that the loan officers at these institutions knew far more about the risks involved in the people to whom they lent money that I saw even our best regulators at the Fed capable of doing.

So the problem here is something which looked to be a very solid edifice, and, indeed, a critical pillar to market competition and free markets, did break down. And I think that, as I said, shocked me.

Kahneman on Greenspan https://www.youtube.com/watch?v=qKaMpvkXpyA