Today Paul Krugman writes once more on the sins of the bankers’ longtime shill in Washington, Alan Greenspan:

Apologists for the mortgage industry claim, as Mr. Greenspan does in his new book, that “the benefits of broadened home ownership” justified the risks of unregulated lending.

But homeownership didn’t broaden. The great bulk of dubious subprime lending took place from 2004 to 2006 — yet homeownership rates are already back down to mid-2003 levels. With millions more foreclosures likely, it’s a good bet that homeownership will be lower at the Bush administration’s end than it was at the start …

“Fed shrugged as subprime crisis spread,” was the headline on a New York Times report on the failure of regulators to regulate. This may have been a discreet dig at Mr. Greenspan’s history as a disciple of Ayn Rand, the high priestess of unfettered capitalism known for her novel “Atlas Shrugged.”

In a 1963 essay for Ms. Rand’s newsletter, Mr. Greenspan dismissed as a “collectivist” myth the idea that businessmen, left to their own devices, “would attempt to sell unsafe food and drugs, fraudulent securities, and shoddy buildings.” On the contrary, he declared, “it is in the self-interest of every businessman to have a reputation for honest dealings and a quality product.”

I’ve never beaten Paul Krugman to the punch before, but on September 16 I wrote …

…a particularly inane specimen of Greenspaniana from an old essay by him appeared in Ayn Rand’s Objectivist Newsletter:

Regulation, in an unregulated economy, is thus a major competitive tool…Drug manufacturers and food processors vie with one another to make their brand names synonymous with fine quality. Physicians have to be just as scrupulous in judging the quality of the drugs they prescribe…

A company cannot afford to risk its years of investment by letting down its standards of quality for one moment or one inferior product; nor would it be tempted by any potential “quick killing.”

Poor Alan, you must be thinking by this point. Little did the young economic consultant know that the thalidomide tsunami was about to smash his naïveté to bits.

Hold your pity. Greenspan’s youthful (he was 37) brain dropping appeared in August of 1963, well after Washington Post reporter Morton Mintz broke the story of how a brave federal regulator named Dr. Frances Kelsey had singlehandedly protected the United States from the worst horrors of thalidomide.

To be ignorant of this Greenspan would have had to be living on Mars. Evidently he was not, for on the very next page of the same fatuous essay he continues:

The guiding purpose of the government regulator is to prevent rather than to create something. He gets no credit if a new miraculous drug is discovered by drug company scientists; he does if he bans thalidomide.

Posted by Jerome Doolittle at December 21, 2007 10:17 AM

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