Robert Reich had these thoughts in the green room earlier today as former Fed Chairman Alan Greenspan was talking to ABC’s Jake Tapper about how there were only a handful of people in the world who could have possibly seen what was to come back in 2007:

He says he bore no responsibility for the housing bubble that catapulted the nation into a financial crisis in 2008 because no one could have known about the bubble when he chaired the Fed in the years before it burst.
…
What?

If any single person is most responsible for the financial crisis, it’s Alan Greenspan. He presided over a Fed that lowered interest rates to zero (adjusted for inflation) but failed to prevent banks from using essentially free money to speculate wildly. You do not have to be a brain surgeon to understand that if money is free, banks will take it and lend it out. And if oversight is inadequate, the banks will lend the money to anyone who can stand up straight and to many who cannot. The result will be a giant subprime lending bubble that will burst.

If any three people are most responsible for the failure of financial regulation, they are Greenspan, Larry Summers, and my former colleague, Bob Rubin. In 1999 they advised Congress to repeal Glass-Steagall, which since 1933 had separated commercial from investment banking. By 1999, Wall Street was salivating over the repeal because it wanted to create financial supermarkets that could use commercial deposits to place bets in the financial casino. That would yield the Street trillions.

Reich then goes on to talk about the Brooksley Born derivative regulation debacle as chronicled in the PBS Frontline documentary The Warning, one of the most damning critiques of the role Greenspan, Summers, and Rubin played in the financial market crisis, before coming to a conclusion that, sadly, far too few have arrived at.

Back to that in a minute…

As for the interview itself, listening to the former Fed chief being confronted with Michael Burry’s NY Times op-ed piece – I Saw the Crisis Coming. Why Didn’t the Fed? – it quickly becomes clear that Greenspan is either still in deep denial or completely out-of-touch with the real world or, perhaps, some combination of the two.

If you skip to about the 8:45 mark in the video below you’ll get right to it:

From the transcript at ABC News, you get the following (all emphasis mine):

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.

This has got to be his lamest excuse yet – either that or it simply confirms that he was so detached from the real world that it’s perfectly understandable that the biggest financial bubble in history was inflating under his nose six or eight years ago.

It continues to amaze me that the former Fed chairman still gets invited back to these talk shows to discuss the economy and financial markets. It’s not clear exactly how Jake Tapper could have better handled this – just asking the question posed by Burry and letting the response be judged for what is may have been best.

Reich certainly didn’t like the answer that was provided:

Yet Greenspan continues to take no responsibility for what occurred. In the interview he just completed he avoiding saying anything about the failure of the Fed under his watch to adequately oversee the banks, and the absence of sufficient financial regulation to begin with.

I dislike singling out individuals for blame or praise in a political system as complex as that of the United States but I worry the nation is not on the right economic road, and that these individuals — one of whom advises the President directly and the others who continue to exert substantial influence among policy makers — still don’t get it.

No, they clearly don’t get it.

It should be interesting to see what happens this Wednesday when Greenspan is scheduled to be the first witness to testify before the Financial Crisis Inquiry Commission as part of a three-day hearing.

If memory serves, Chairman Phil Angelides had a good interchange with Goldman Sachs chief Lloyd Blankfein not long ago. Hopefully, he’s working on some good one-liners for his questioning of the former Fed chairman.