Was It The Free Market Or The Very Meddled-With Market?
I got this from the Ayn Rand Institute, "Greenspan Has No Free Market Philosophy," contesting Greenspan's contention that there's a flaw in his "free market ideology" -- his expectation that the self-interest of lending institutions would protect shareholder equity:

...According to Dr. Yaron Brook, executive director of the Ayn Rand Center for Individual Rights, "any belief Greenspan ever had in truly free markets was abandoned long ago. While Greenspan long ago wrote in favor of a truly free market in banking, including the gold standard that such markets always adopt, he then proceeded to work for two decades as leader and chief advocate of the Federal Reserve, which continually inflates the money supply and manipulates interest rates. Advocates of free banking understand that when the government inflates the currency, it artificially increases prices and causes booms in certain sectors of the economy, followed by inevitable busts. But not only did Greenspan lead the inflation behind the .com bubble and the real estate boom, he blamed the market for their treacherous collapses. Greenspan should have recognized that what he wrote in 1966 of the boom preceding the 1929 crash applied here: 'The excess credit which the Fed pumped into the economy spilled over into the stock market--triggering a fantastic speculative boom.' Instead, he superficially blamed 'infectious greed.'

"Should it be any shock that Greenspan now blames the free market for today's meltdown--rather than the Fed's policies, which fueled an inflationary housing boom, which rewarded reckless lenders and borrowers from Wall Street to Main Street? Greenspan didn't mention the word 'inflation' once in his testimony.

Here's Paul Kedrosky from Newsweek with another take:

Most economists now agree that Greenspan, as chairman of the U.S. Federal Reserve, kept interest rates too low for too long. What's less widely appreciated is his role as a technology booster. In March 2000, at the peak of the dotcom bubble, he gave a speech about a revolution being built on the Internet. It was transforming finance, he said, making it possible to "reallocate risk" via the "creation, valuation and exchange of ... complex financial products on a global basis." In short, Greenspan saw that the tandem of the Internet and fast computers were perfect for splitting mortgages into tiny pieces, repackaging them and then shunting them to yield-hungry investors across the country and around the world. But he should have known it would create what his fellow economists call an "agency problem": Remote owners of teensy mortgage pieces didn't police loans, didn't worry enough about loan quality, and were impossible to negotiate with should a loan become troubled. They just wanted cash flow. And so the fuse for a future credit crisis was lit.

...You can go to Yahoo Finance to check the recent share price of Wal-Mart, its market capitalization and its current sales. There is no one free place where you can do the same thing across subprime mortgages, asset-backed securities, credit swaps and all the other arcana inherent in taking the temperature of modern global markets. Instead, you have to wander from site to site, sort of like building a jigsaw puzzle from disguised pieces strewn around an entire city. It is part treasure hunt and part puzzle-building.

That's not the end of the problems. Information about financial time bombs, like derivatives, is veiled in acronyms that make you want to gouge your eyes out. (Consider two different measures of the performance of mortgage securities: ABX.HE.AA.06-2 and ABX.HE.AA.06-1--such lovely and lyrical names!) There is an entire language required to understand this new generation of financial technologies, from credit default swaps to collateralized debt obligations to residential mortgage-backed securities, not to mention the corresponding three- and four-letter abbreviations. There's also data on current account deficits and yield spreads. Most people, faced with this tsunami of data, do the only rational thing: they give up.

The trouble with giving up, however, is that the world goes on without you. And one of the obligations of being a citizen in a free society is vigilance--watching what is happening in your neighborhood, whether it's financial or physical. A lack of regulatory oversight certainly played a role in the current crisis, but over-relying on regulators is a dangerous practice. Citizens need to take responsibility. Apathy and indifference in the face of a complex and fast-changing world is a path to ruin.

Nevertheless, if the Internet's data smog has bludgeoned the average consumer into indifference, it has also enabled traders to act more swiftly and decisively. Traders, bankers and financial engineers have built up the mental shortcuts needed to keep track of a hundred credit default swap spreads, or 10 favorite bonds to watch, or myriad structured-mortgage finance product prices. This generation of bankers is the first to be truly Web aware, and they use the technology to the maximum. That's meant lower costs and faster trading, but it has also helped aid and abet the current crisis. We have used the Internet and modern communications technologies to create a shadow-banking system, an unregulated lending network that was, by 2007, as large as the traditional banking system. It is now shrinking, but its remnants must be dragged into the light, with over-the-counter derivatives pushed onto central clearinghouses.

Consider that many unregulated financial transactions are carried out over instant messaging. Want to set up a $100-million credit default swap on the bank of your choice? No problem. Just IM a few trader friends at other hedge funds or banks, propose the idea, and then seal the deal with whoever likes your terms. No phone conversations, no messy paperwork, just a few quick messages and it's done. This kind of easy access to peers has turned trading into a high-stakes, low-documentation videogame, and in doing so it has encouraged and facilitated many risky behaviors...

Again, I'm not an economist or knowledgeable enough about economics, so I can't really comment intelligently on this. And I do think there has to be some regulation -- to name just one example within my range of knowledge and experience, to prevent identity theft.

Eric Drew, who was battling leukemia in a hospital, had his identity stolen (I blogged about his dual struggle a while back). And like me, he thinks financial institutions should have to look out for customers more in granting credit -- not just do what's cheapest for them, in turn, letting people's lives get eaten by identity theft. And this guy, Eric Drew was already having his eaten in the most profound way when he got the creditors coming after him for the debts, in his name, by his thief. From StreetInsider.com:

Every year millions of Americans are the victims of identity theft, and in a lawsuit filed against major credit card companies, identity theft victim Eric Drew claims that the credit industry is facilitating the crimes. By attempting to maximize profits by fully automating their identity verification systems, credit card companies such as Bank of America, Citibank and Chase are knowingly fostering rampant fraud and forcing their customers to deal with the results of their irresponsible credit card issuing practices.

Criminals armed with only a few pieces of personal information such as an address and a social security number are able to fraudulently apply for credit cards under the victim's name. Currently there are no reliable identity verification systems in place to prevent thieves from receiving and using the cards. Identity theft losses totaled over $52 billion in 2002 and affected almost 10 million Americans.

"It's the worst customer service in America," said Drew, an identity theft victim in 2003. "These banks are intent on issuing as many cards as possible -- and forcing their legitimate customers to deal with a complicated mess to prove their innocence when fraud occurs."

In Drew's case, the theft was particularly heinous. While fighting for his life battling leukemia in a hospital, his identity was stolen by a hospital worker. Health Associated Identity Theft (referred to as a HAIT Crime) is difficult to fight because the victim must dispute fraudulent charges, contend with hostile collection practices, and attempt to repair damaged credit ratings from a hospital bed or convalescent home.

Drew is suing Citibank, Bank of America, Chase, Equifax, and Experian, claiming that they didn't verify application information, and is attempting to mandate that the credit industry verify an applicant's identity prior to issuing credit.

"Americans need to know that financial institutions are not only causing the identity theft problem, but are forcing us to clean up their mess," added Drew. "Even with all the other issues I'm dealing with, I decided I couldn't let this go on happening to others without a fight."