Greenspan "brushed aside" warnings about potential subprime crisis

Paul Krugman reports that "financial innovation" got us into this mess and it may be a rough ride before we get out of it. The faith was so deep in the "market" that even the most bright of economists could not understand the complexity of this market.
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http://www.nytimes.com/2007/12/03/opinion/03krugman.html?_r=1&ref=opinion&oref=slogin

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Why was this allowed to happen? At a deep level, I believe that the problem was ideological: policy makers, committed to the view that the market is always right, simply ignored the warning signs. We know, in particular, that Alan Greenspan brushed aside warnings from Edward Gramlich, who was a member of the Federal Reserve Board, about a potential subprime crisis.

And free-market orthodoxy dies hard. Just a few weeks ago Henry Paulson, the Treasury secretary, admitted to Fortune magazine that financial innovation got ahead of regulation — but added, “I don’t think we’d want it the other way around.” Is that your final answer, Mr. Secretary?

Now, Mr. Paulson’s new proposal to help borrowers renegotiate their mortgage payments and avoid foreclosure sounds in principle like a good idea (although we have yet to hear any details). Realistically, however, it won’t make more than a small dent in the subprime problem.

The bottom line is that policy makers left the financial industry free to innovate — and what it did was to innovate itself, and the rest of us, into a big, nasty mess.

The bankers absolutely made out like bandits until the bubble burst.

fuck off Alan, you could have signaled tighting of credit and regulations that would have pulled back on the insane loans and apprasials that were occuring 2004-2006. There is a story on Eschaton of the same home "flipping" in 2005 for $700k, then in 2006 for $1.2M and then AGAIN in 2006 for $1.9M, who is the nutbar bank that approved this loan, did the appraiser get a kick back. Your telling me that was "froth", your telling me you didn't have the power to signal to banks and the various regulatory agenicies that lending practices had become overly lax? overly insane? What you were afraid to pop a bubble or "slow" growth? Admit it Alan, you fucked up, for political expediency, you made a galatic fuck up. When you could have done something, you waited to raise interest rates, when you finally did start raising them, it was too late to bring the economy in softly. It was about the 2004 elections, you should have put America first, not your ideological interests, which were fucked up to begin with anyway.