Last year, during the economic meltdown, I wrote about Ayn Rand’s prophetic thoughts in books like Atlas Shrugged and Fountainhead. She basically defends a free market economic from an atheistic, rationalistic perspective. She warns of a time in which the have-nots will simply take wealth from the haves. In Atlas Shrugged, the story that she tells is about failing industries using the government to take money from successful industries in order to stay afloat. Sound familiar?Rand ’s) are actually the flip side of communism. They still cling to an unfallen view of man. Men aided by a market will be guided toward righteousness and punished for folly, they say. They fail to reckon with the fact that man is so lost that he will (outside of some sort of accountability) find ways to bilk and manipulate others for his own gain. Greenspan and others bought intoRand ’s rosy view of reason and left giant parts of the financial markets without oversight. Grasping the truth that Reagan announced—“that government is not the solution, but the problem”—they embraced it without thought and stopped watching what they should have been. The politicians lined their pockets until the whole house of cards started toppling when people kept leveraging money to buy real estate because real estate was going to increase in value perpetually, right? Of course, when it did not, the collapse began. Now, of course, the politicians are beating the drums to hang the fellows they were patting on the back a couple of years ago which is, in my opinion, even more grotesque than Greenspan’s obvious hubris. (Greenspan at least had the guts to come before Congress and admit that he was wrong.) The scariest thing (I am writing this on Halloween) in this documentary happens at the end when they go through the cast of characters involved in the Greenspan/Rubin Kool-aid drinking party. Who, you ask, were the young bucks that held their coats? Larry Summers and Timothy Geithner! Two of Barack Obama’s main economic advisors!
Well, recently a friend sent me a documentary from Frontline—a PBS show—outlining another prophet of the financial crisis. This one Brooksley Born is almost unknown—and she was, unsuccessful fighting to regulate markets. Here is a link to the video (it is about an hour):
One of the most shocking parts of the video was the revelation—new to me—that Alan Greenspan, the former head of the Federal Reserve, was highly influenced by Ayn Rand’s philosophy. She was invited to the Oval Office for the ceremony when Greenspan was sworn in. I favor free markets and capitalism, so why does this Randian connection bother me. Watch and you will see! Here, however, is the problem in a nutshell. Some of the economic trouble that we fell into was based on a lack of transparency and fraud. Greenspan, along withRand , believes that rational markets will punish things like fraud without government oversight. Reason, you see, is king. There is one problem. Man is broken. We are horrible sinners. We lie, cheat and steal. As the liturgy says, “we are born in sin and continue to sin and there is no health in us.” Greenspan’s views (as well as
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Veritas Academy , in our Omnibus classes, we read Ayn Rand. We learn about the strengths and the weaknesses of her philosophy. Sometimes I get asked why we read her. Oddly, she is both the cause and a great (and I think justified) critic of the present bail out solution. Ideas have consequences! That is why we read.
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I think Greenspan is getting senile, today he said that you can stop asset bubbles by increasing capital requirements. That just increases the cost of credit. The next time you have a real estate bubble, you’ll have the same problem, assuming that banks are still in the business of loaning against real estate. If you want to stop this problem, then eliminate the federal subsidies for real estate development and investment, then require people in that industry to put their own money at risk instead of someone elses. If Greenspan really wants to change the banking system, though, then simply ban 95% and 90% LTV loans. Require a bigger equity cushion. BTW, the “too big to fail” argument is a fallacious one. During the Great Depression, Canada had no bank failures. The reason was that their banks were very large. The banks closed branches, etc., but none of them failed. By contrast, the US was dominated by thousands of very small banks, and we had more than 10,000 of them fail. So there is nothing inherently unsafe about a banking system dominated by large banks. The real problem with large banks is that during good times, they don’t provide enough competition for each other.
Hi – great write-up. We are huge readers of Ayn Rand / Atlas Shrugged here too – so much that we made the green-blue bracelet that Hank Rearden tried to give to his wife. It’s named the Liberty Bracelet – take a look at http://www.libertybracelet.com. Proceeds are going to the Campaign For Liberty so we figured you might like it.
If you’re interesting in posting an entry about the Bracelet or have us write about it on your site, we’d be happy to send you the “Friends and Family” coupon for them! Please drop us an email if you’re interested, we would be very thankful.
Anyhow, nice blog… we joined your RSS feed now so thanks again!
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