Have a look at Jeremy Grantham’s latest missive: Immoral Hazard
The 1Q 2008 letter looks at asset bubbles and puts the role of the Fed under the leadership of Greenspan and Bernanke under the microscope, with a wistful nod to Paul Volcker:
It’s not that the former Fed boss Greenspan was incompetent that is remarkable. Incompetence is common enough after all, even in important jobs. What’s remarkable is that so many people don’t seem, even now, to get it. Do people just believe high-quality self-justifying blarney? Or is it just that they apparently want to believe that critical jobs in a great country attract great talent by divine right.
Sometimes, of course, they do, but sometimes the most important jobs – even that of a presidency or a Fed boss – end up with mediocrities. Let us pause here to regret the absence of Mr. Volcker and wonder what a parallel Volcker universe would have been like. Just as we can wonder how much a few votes in Florida or a vote in the Supreme Court would have changed our world from what it is today.
Paul Volcker inherited about as big a mess as we have today. He worked out what he had to do and did it with unusual lack of concern about what Congress thought of the necessary pain involved and the number of enemies he might make. He paid the price for forthright behavior by being replaced, despite a record for correct and tough behavior that makes for the most invidious comparison today. When Volcker was replaced, by the way, he did not moan and groan but like an old soldier quietly disappeared. There were no high-proﬁ le announcements about the economy or any $300,000-an-evening appearances paid for by ﬁnancial ﬁrms. . . .
Jeremy Grantham 4/25/2008