Ooh, I am ill. The Financial Times seems to have scooped this story (I don’t see it on Bloomberg).
In keeping with Greenspan’s tutelage at the knee of Ayn Rand, he has exercised his right not to be constrained by propriety or other rules that govern little men and has gone and sold himself to what is no doubt the highest bidder, Paulson & Company. Paulson is famous for its spectacular big against subprime this year, and its Paulson Credit Opportunities fund was up 410% through August.
It’s one thing for Greenspan to sell books and give speeches to try to salvage his reputation. Nixon did that too, with more success and less profit. It is quite another for him to benefit in a far more direct fashion from the devastation he created, by hooking up with the fund that scored the biggest kill from the worst aspects of the negative real interest rates that Greenspan put into effect.
Overly cheap credit always and inevitably leads to bad investments, And Greenspan of all people should have known that. How he can rationalize his actions then and now is beyond me. But I forgot. Objectivism means never having to say you’re sorry.
Actually, it is worse than that. More than 50 years ago, this country could be awakened from its nightmare of Joe McCarthy-led Communist-in-every-closet witch hunting by the exposure of McCarthy’s methods in the first nationally televised Congressional hearings. The pivotal moment occurred when a Boston lawyer, Joseph Welch, rebuked McCarthy with the now-famous phrase, “Have you no sense of decency, sir, at long last? Have you left no sense of decency?”
But decency and propriety mean nothing in America these days. What used to be recognized as corruption is now shrugged off as business as usual. When a nation loses its moral compass, it also loses its soul.
From the Financial Times:
Alan Greenspan, the former chairman of the US Federal Reserve, is to become an adviser to Paulson & Co, the $28bn New York-based hedge fund company that achieved spectacular investment returns at the height of the credit squeeze last year.
Mr Greenspan will join the advisory board of the credit specialist investment house. Paulson will be the only hedge fund that Mr Greenspan will work with under the terms of the agreement.
Paulson was propelled into the spotlight last year as perhaps the biggest known winner in making aggressive bets against US subprime home loans. Investors estimate that its funds racked up profits of $12bn.
Mr Greenspan already holds separate advisory roles with Deutsche Bank and Pimco, the asset management firm. The financial terms of the arrangement were not disclosed.
John Paulson, president of the hedge fund, said: “Few people, if any in the world, have the experience with, and depth of understanding of, global financial markets [of Mr] Greenspan.”
He said Mr Greenspan would share his perspectives with the Paulson investment management team on the direction of the economy, assessing the potential for and severity of a US recession.
Mr Greenspan served as chairman of the Fed for 18 years until 2006. His pronouncements on the economy through regular public appearances still have the power to move markets.
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HF Mngr: Mr Greenspan, so do you think the market will go down from here, or up ?
Mr G: well.. the chances of either one of these occuring is pretty high. but the clue you might be looking for may not lie within what i might describe to you as the answer to your question. the clue i can give is the answer to another question that you might need to ask in order to understand what im going to say..
I wonder if he gets paid based on performance. if he is clever, he isnt..
No shame whatsoever. He is after all, a disciple of Ayn Rand. A true libertarian would never consider morality a barrier to making a buck!
It’s amazing what you can accomplish when your primary principle is to live unbound by principles ;)
Once again, I’m in awe of his evil genius.
Yves, Greenspan is an appalling character, but I’m not so sure who’s worse–him or the other Paulson, Hank. Goldman Sachs has done pretty well hedging against subprime-related assets which it hawked with Hank Paulson at the helm and afterwards. Sec. Paulson’s paycheck from hypocrisy was probably larger than anything Greenspan will receive in an advisory role to John Paulson.
Emmanuel, To be be fair, one might argue it wasn’t H Paulson’s job to share with the world his innermost thoughts on the future hazards of (and opportunities betting against) structured sub-prime stuff. One would argue, however, that it was Mr Greenspan’s job, and in this respect, he failed miserably. I wonder if J Paulson will listen to AG were he – again – to suggest shooting the moon by taking on some curve risk, as he did to homeowners in 03 & 04, encouraging them to swap their long-dated fixed mtgs for “cheaper” ARMs by telling them it was safe to do so. Too bad he neglected the entire primer on basic associated risk management when waving the bright-red ARM cape at those considering such a leveraged recap of their primary residence following an already stellar move in historical prices.
While business leaders’ ethics are pervasively questionable, they merely reflect America’s expectations, whereas despite the depths to which the Bush Admin’s has brought public service, Greenspan’s divergence from his Public Service responsibility is far worse, hands-down.