Michael Burry, the money manager who bet big against the housing market before the bubble burst, is living proof that Alan Greenspan is wrong when he says that nobody saw the mortgage mess coming.
Mr. Burry writes in the New York Times that Mr. Greenspan's contention that "everybody missed it" is "not how I remember it."
Mr. Burry not only saw the disaster coming, he wrote letters to investors to convince them of the coming calamity.
The irony is even his investors, who were set to make millions, were pushing him to abandon his positions. (Mr. Burry is one of the main characters in Michael Lewis's new book The Big Short --see the Globe and Mail review here.)
"I argued as forcefully as I could, in letters to clients of my investment firm, Scion Capital, that the mortgage market would melt down in the second half of 2007, causing substantial damage to the economy. My prediction was based on my research into the residential mortgage market and mortgage-backed securities."
Mr. Greenspan was recently asked why he had been wrong and Mr. Burry had been right.
"The former Fed chairman responded that my insights had been a 'statistical illusion.' Perhaps, he suggested, I was just a supremely lucky flipper of coins," Mr. Burry writes.
In Mr. Burry's view, this is revisionist history from Mr. Greenspan, and prevents Washington regulators and the Fed from the soul-searching that might lead to real change. The first step is admitting you made a mistake, and Mr. Greenspan appears unwilling to do that.
"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."