Are Alan Greenspan's new ideas better than the old?

“All of the sophisticated mathematics and computer wizardry essentially rested on one central premise: that enlightened self interest of owners and managers of financial institutions would lead them to maintain a sufficient buffer against insolvency by actively monitoring and managing their firms’ capital and risk positions,” the Fed chairman said. The premise failed in the summer of 2007, he said, leaving him “deeply dismayed.” Self-regulation is still a first-line of defense, Mr. Greenspan said. But after the financial collapse of 2007 and 2008, “I see no alternative to a set of heightened federal regulatory rules of behavior for banks and other financial institutions.”

ALAN GREENSPAN's reputation hasn't fared particularly well in recent years. Once heralded as the orchestrator of rapid growth and the master of the business cycle, Mr Greenspan is now seen as the progenitor of a failed theory of central banking, and the last man to recognise the troubling nature of the housing bubble. But as John Hilsenrath notes (via Mark Thoma ) the maestro's outlook is changing:

And Mr Greenspan has also told the Financial Times that it may be time to nationalise:

It may be necessary to temporarily nationalise some banks in order to facilitate a swift and orderly restructuring...I understand that once in a hundred years this is what you do.

Given his record, should this encourage us to feel more favourably or less favourably toward nationalisation?

(Photo credit: AFP)