Courtesy Reuters

In his recent essay “Never Saw It Coming” (November/December 2013), Alan Greenspan makes two central arguments: first, that virtually no one foresaw the 2008 U.S. financial crisis and, second, that irrational “animal spirits” were the root cause. If true, these propositions would absolve policymakers such as Greenspan of blame. But neither holds water.

The truth is that many experts worried about the U.S. housing bubble and predicted a crash, even if they couldn’t pin down its timing or severity. As early as 2002, Congress summoned Greenspan himself to discuss “the possible emergence of a bubble in home prices,” a

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