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Dear Mr. Berko:

Dear F.K.:

If you must play the blame game, then it belongs to former Federal Reserve Board Chairman Alan “The Mumbler” Greenspan, whom, as readers know, I’ve held in low regard since 1999. I can’t find a compelling qualification in his resume that makes him fit to head the Fed or even serve as a member ex-officio of the board of governors. History will show that this sod terribly mismanaged the Federal Reserve Board’s interest climate by keeping rates so very low for so very long, which persuaded consumers to borrow record amounts of money at unprecedented debt levels for cars, homes, appliances, electronics, all-terrain vehicles, boats, pickups and campers.

The low rates also encouraged rampant speculation in the housing market, moving prices so high that Greenspan, with bubbling enthusiasm, encouraged the banks to make mega-billions of home-equity loans so consumers could pay off their credit cards and have room for another round of newer credit card purchases. Then this fumbling doofus proceeded to raise interest rates 17 times in two years, trapping heavily indebted consumers in a financial riptide. Then the dissembling Mumbler, as late as the summer of 2006, denied there was even a hint of a housing bubble.

This clown enjoyed toying with congressional committees, whose combined economic IQ was minus 100, adored the cameras and marveled at his public image. I believe that either Donald Duck or Mickey Mouse could have done a better job than the Mumbler.

However, as the Mumbler’s neural synapses continued to misfire in his aging brain, he enabled Merrill Lynch, Lehman Bros., Citigroup, Wachovia, Bear Stearns, etc., to borrow themselves to death. The Mumbler, as well as the milksoppy John Thain — chairman and CEO of Merrill Lynch, who went “auf Wiedersehen” from the New York Stock Exchange (NYSE), which was happy to have to have him leave — permitted those brokerages to buy securities with only 3 percent to 5 percent collateral. (When civilians buy securities, they require 50 percent.) So, with a few billion in collateral, which needed not to be cash, Lehman Bros., Merrill Lynch, etc. bought portfolios of hundreds of billions of mortgage bonds. When those bonds crashed between 50 percent and 70 percent in value, Merrill, Lehman, etc. had losses of $50 billion to $70 billion and were required to deposit that amount of free cash to meet federal banking requirements.

So Merrill, Lehman etc. begin to liquidate assets and had to beg billions from banks overseas. This crisis would never have occurred if Thain’s NYSE and the Fed’s Greenspan had required brokerages to put up 50 percent collateral rather than 3 percent. I think the only reason U.S. consumers don’t own an elephant is because the Fed and NYSE have yet to figure out a way to sell one for 5 percent down.

The NYSE is supposed to be a watchdog to make sure its members firms comport themselves in the public interest. But the effete Thain was too busy expanding the NYSE to concern himself with the public interest and ignored the dangers of the unprecedented financial leverage employed by the member firms that paid his salary.

Meanwhile, the Federal Reserve Board was supposed to steer the economy and make course changes when the waters got rough. But Greenspan was too busy coveting his public image and allowing his friends on Wall Street all the financial latitude and leverage they needed to hang themselves.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@comcast.net. © 2008 Creators Syndicate Inc.