Alan Greenspan gives us one more example of why the man who's been wrong about everything should not be given any time to weigh in on the mess with our banking system and Wall Street that he helped to create. Apparently Greenspan doesn't think we will be able to separate the Wall Street casinos that got mixed into the formerly trusted banking industry and to do as Paul Volcker has recommended because it will be too hard to "segregate the types of transactions which are helping customers and those which are strictly proprietary". I'd love for someone to explain to me what that bit of mumbo-jumbo means since I don't know how to interpret economics 101-Doublespeak. For some clarity, here's what he's against.

Volcker Optimistic Financial Overhaul Will Include His Rule:

Paul Volcker, a top adviser to U.S. President Barack Obama, Tuesday expressed optimism that a financial overhaul containing a version of his proposal to limit bank risk would pass in Congress.

The former Federal Reserve chairman defended his proposal to give regulators the power to force banks to get rid of divisions that make risky bets with their capital, in order to help prevent another financial crisis.

“We have a promising possibility of getting agreement here” for a “reasonably good bill,” Volcker said, adding he was more optimistic than a month ago. He was speaking at the Peterson Institute for International Economics.

Senate Democrats on March 15 proposed a financial overhaul that would hurt big Wall Street banks by reining in their profits and requiring them to hold more capital. The proposal includes a version of what Obama has dubbed the “Volcker rule.”

Volcker wants to prevent commercial banks with federally insured deposits from engaging in “proprietary trading,” or doing speculative trading with the company’s money. The Senate bill wouldn’t prohibit certain forms of bank speculation outright, but it would give regulators leeway to enforce limits on a case-by-case basis.

“Let commercial banks be commercial banks,” Volcker said. Although it may be a step back compared to developments in the financial industry over the past decades, it would be a step to a “safer and more productive future.” Read on...

Amazingly that made some sense to me, unlike this nonsense that Greenspan was spouting. Maybe anyone that speaks Ayn Randsism can interpret for me. It's really pathetic that this man is allowed to claim that the country "had no experience of the type of risks that arose following the default of Lehman Brothers in September 2008". Really? What the hell does he think caused the Great Depression, or the Savings and Loan Crisis? Couldn't be some pesky thing called deregulation could it? Couldn't be undoing everything FDR put in place to keep us from having another Great Depression, could it?

For anyone that needs a reminder of this man's hubris and why no one should be interviewing him for advice on how to fix our economic problems now, go check out my post here on the Frontline documentary The Warning--One Lone Regulator Warned About Derivatives' Dangers. It's really shameless that ABC thought we should be hearing from this man that helped create the environment for our economic meltdown to occur to come out and give advice on how to fix it.

Transcript via ABC News below the fold.

TAPPER: You have said recently that if institutions are too big to fail, they're too big. Do you support the Volcker rule, which would limit some of the transactions that commercial banks can do?

GREENSPAN: Well, I think the point that he is making, that deposit funds which are subsidized should not be employed for speculative purposes, I would agree with. The problem basically with the Volcker rule is it's very difficult to apply in a general way, and I think that's why there's been considerable resistance to it, not the principle, but the issue of being able to segregate the types of transactions which are helping customers and those which are strictly proprietary. Until they do that, I think it's very difficult to implement.

TAPPER: You'll be testifying about the financial crisis on Wednesday before the Financial Crisis Inquiry Commission. When you testified before Congress in October, you said that you finally saw a flaw in -- in the way that you looked at markets, that markets cannot necessarily be trusted to completely police themselves.

But isn't it -- isn't it more than a flaw? Isn't it an indictment of Ayn Rand and the view that laissez-faire capitalism can be expected to function properly, that markets can be trusted to police themselves?

GREENSPAN: Not at all. I think that there is no alternative, if you want to have economic growth and higher standards of living, in a democratic society, to have competitive markets. And, indeed, if you merely look at the history since the Enlightenment of the 18th century, when all of those ideas surfaced and became applicable in public policy, we've had an explosion of economic growth, and especially in the developing countries, where hundreds of millions of people have been pulled out of poverty, of extreme poverty and starvation, basically because we have competitive markets.

So it's not the principle of competitive markets which really has no alternative which works. It is a strict application -- as I presented in a Brookings paper fairly recently on a somewhat technical area, the major mistake was assuming what the nature of risk would be. And the reason it was missed is we have had no experience of the type of risks that arose following the default of Lehman Brothers in September 2008.

That's the critical mistake. And I made it. Everybody that I know who works in this business made it. And it means that basically we have to work our way back to understanding what went on. And as I argue, what we need is far more required capital for financial institutions than we've had.

TAPPER: There's -- as you know, Michael Bury (ph), who is a hedge fund manager in California, who made a lot of money looking at the subprime mortgage situation in the previous years and -- and saying to himself, "This is crazy. It can't continue," and he bet against it and made a lot of money, you were asked about it last month, and you referred to him as a statistical illusion.

He -- he has an op-ed in today's New York Times in -- in which he questions whether or not you should be taking him more seriously. And he says, "Mr. Greenspan should use his substantial intellect and unsurpassed knowledge of government to ascertain and explain exactly how he and other officials missed the boat. If the mistakes were properly outlined, that might both inform Congress's efforts to improve financial regulation and help keep future Fed chairmen from making the same errors again."

Why are you not more interested in hearing what he has to say?

GREENSPAN: Well, on the contrary -- first of all, I was not referring to him specifically. There are three -- three -- three (ph) groups of people, those who got -- those who got it wrong about what the complexity was about to emerge in the -- that's the vast majority of people, myself included.

TAPPER: Right.

GREENSPAN: Then there's a group -- a relatively small, but not negligible group, who got it surely by luck. And then there's a very small group -- most of whom are my friends -- who got it right for the right reasons and that have done it time and time again.

I don't know Mr. Bury (ph). But he basically may very well be in that third group. I don't know that.

But the problem is, he in that article, which I read quickly this morning, is actually making the case that it's a very small group, because he says effectively that no one agreed with him. Well, he made his money -- properly, in my judgment, and I think very successfully -- by effectively selling subprimes short. Now, if nobody...

TAPPER: He was betting against subprime mortgages working.

GREENSPAN: Exactly. And if everybody agreed with him or a large proportion of people agreed with him, he wouldn't have been able to sell those contracts, the short contracts, so to speak, which worked their way through credit default swaps and technical jargon. There would be nobody to buy it, because they would agree with him.

So it required a very large proportion of the investing public, sophisticated investing public, to disagree with him. And I think -- I don't know whether or not he is in that extremely small group, which may -- may, in fact, be really exceptionally adroit at these things.

As I said a minute ago, I know four or five people who are really good. I don't know six, seven, eight or nine.

TAPPER: All right. Dr. Alan Greenspan, we'll have to leave it there. Thank you so much for coming...

GREENSPAN: My pleasure.