Alan Greenspan Essay Example | Topics and Well Written Essays - 1000 words

Alan Greenspan - Essay Example Both had different ideologies as Greenspan advocated for the deregulation of the financial markets and born propagated for the government regulation. The main source of conflict arose as a result of the Over the counter OTC derivatives that were private contracts between major players on the Wall Street on particular bets. Born cited a high likelihood of fraud taking place. But based on Greenspan he believed that the market would identify the frauds and corrects itself. These sentiments were in line with his core principles of a free market. The assumptions of a free market commonly no government intervention, free flow of information of information, the actions of an individual have no effect on the market and finally, there are no barriers to entry and exit the market. This was the principles that Greenspan stood by up to his retirement but later confessed that the philosophy had major drawbacks. The hedge fund long-term capital management was characterized by large banks secretly investing large amounts of money on the over the counter derivatives at the Wall Street. The hedge fund was additionally invested by a majority of the in the know investors. These dealings were shrouded in secrecy and the government didn’t have any clue about them. They were as a result of the wall stock brokers setting complex mathematical formula that guaranteed the investors of a significant return on their investment. Finally, there was a meltdown as the Wall Street brokers were unable to handle the situation causing a collapse.