• Need a Real Sponsor here

Jeffrey Sachs Rails against Ex-Fed Chief Greenspan

Jeffrey Sachs, a prolific economist, author and professor at Columbia University, had unusually harsh words in his speech today directed at Alan Greenspan, former chairman of the Federal Reserve — placing him with much of the blame for the current financial crisis.

Jeffrey Sachs (The Earth Institute)

“The essence of the current downturn is finance,” Mr. Sachs said. “It’s a Wall Street crisis. A crisis made down the block.” He said, and “if you look under the rubble you can figure out what happened and why.”

First, “a long bout of easy credit championed by Alan Greenspan and the Fed outside of the normal boundaries of monetary policy,” which came together with “a nearly complete deregulation of the financial sector contrary to almost everything we know about the risks of a highly leveraged financial system.”

“This is flagrant irresponsibility,” he said. “This isn’t a matter of one’s market philosophy, just profound irresponsibility.” Later, though, he said Mr. Greenspan’s ideology was possibly at fault, given his “Ayn Rand” philosophy that markets take care of themselves “until he discovered the flaw of his theory later.”

Mr. Sachs also spoke harshly of the Clinton and Bush administrations. “We arrived at this cliff through the aggressively irresponsibility of two U.S. administrations in a row,” he said, accusing them of bending to the will of the nation’s biggest lobbying group — the financial industry.

“Where were the regulators? Consciously and deliberately kept out of the scene,” he said. “This led to a bubble financially that was most notable in the housing sector…and Alan Greenspan added fuel to the fire by keeping interest rates around 1%” from 2002 through early 2005.

“You get credit for stopping a Depression but I don’t want to give too much credit because the people who stopped it were the people who started it also,” said Mr. Sachs.

Watch an interview with Mr. Sachs below:

Copyright 2008 Dow Jones & Company, Inc. All Rights Reserved

This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit