This week we heard two ex-Fed Chairmen weigh in on the credit crisis -- one of them a giant; the other a pygmy.

Paul Volcker, the first of the two, is a giant in both the literal and figurative sense. By way of the yard stick, Mr. Volcker stands 6 feet 8. He stands even taller in terms of reputation. If ever there existed a Fed head willing to ôtake away the punch bowl,ö it was he.

The Man Who Tamed Inflation

Volcker is known as ôthe man who broke the back of inflationö in the early 1980s. He took the hard measures necessary to undo the damage wrought in the wild 1970s. The double-digit interest rates Volcker imposed were extremely punishing, though; he had to endure hatred and ridicule to see the job through.

In one lasting example of the fortitude required, angry builders sent two-by-fours to VolckerÆs office, to show how outraged they were by the slowdown he created. He let the boards pile up and carried on. The tough discipline paid off, and the U.S. entered a historic boom time once inflation was tamed.

In assessing the current Fed, the old disciplinarian doesnÆt much like what he sees. On Tuesday, someone asked Volcker if a U.S. dollar crisis was in the works. His response was blunt: ôYou donÆt have to predict it. WeÆre in it.ö

On the matter of the Bear Stearns rescue, Volcker said the Fed had gone ôto the very edge of its lawful and implied power.ö He added that the current climate reminds him of the early 1970sà and he wasnÆt talking about fashion.

A Bitter Maestro

The second ex-Fed head we heard from this week is the pygmy, Alan Greenspan. Once known as ôThe Maestroö for his ability to sway markets, Greenspan has been reduced to a small, crotchety, bitter little man. These days, The Maestro expends half his energy trying to win back the spotlight he loved so dearly; the other half goes to defending his tattered reputation.

GreenspanÆs self-centered howls of self-defense grew rather shrill this week. After once being hailed as ôthe greatest central banker who ever lived,ö more accurate assessments -- like the one that suggests he may have been the worst central banker who ever lived -- seem to be getting to the man.

The MaestroÆs mission is to absolve himself of all responsibility for the current crisis. For all the rambling and double-talk, his excuses boil down to three basic assertions: ôYou werenÆt there; you couldnÆt know what it was like; such-and-such bubble simply couldnÆt have been my fault.ö

The first two points are true as far as it goes. We critics werenÆt in the manÆs shoes; we donÆt know what it was like. But we do know that in 1967, a younger, more idealistic Greenspan wrote an essay titled ôGold and Economic Freedom,ö in which he stated the following:

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of valueà This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.

Those words make Greenspan one of two things. Either he is a jaw-dropping hypocrite, or he is one of the greatest double agents of all time. Perhaps many years down the road, when the fiat money system has finally collapsed and some new form of gold standard has been restored, the Maestro will leave a full libertarian confession on his death bed.

The Opposite of Courage

Needless to say, those waiting for a confession shouldnÆt hold their breath. The truth of what happened is likely far less inspiring. Where Chairman Volcker rose to a hard task, showing himself to be a giant, Chairman Greenspan shrank timidly from his duties, showing himself to be a pygmy.

Volcker saw what needed to be done and did it, sparing little concern for the criticism and even outright hatred he would have to endure. Greenspan tested the waters of courage as far back as 1996 -- the year of the famous ôirrational exuberanceö phrase -- and decided that even the smallest backlash would be too high a price to pay. That tentative warning in 1996 was the last one we heard; it was all warm smiles and eagerness to please after that.

The Maestro chose to bask in glory and adoration rather than do what was right. Where he could have been strong, he was weak. Where he could have been stern, he was gentle. Where he should have been responsible, he broke out the pom-poms and acted as cheerleader instead. He thought only of being loved, regardless of future cost. For a supposed leader with a heavy burden of responsibility, that counts as a disastrous failing.

For 18 years, Greenspan unfailingly gave Wall Street exactly what it wanted -- easy money plus lax oversight -- and now we are paying the price. The current Fed would not be forced to explore ôthe very edge of its lawful and implied power,ö as Paul Volcker lamented, if not for the massive mess Greenspan left behind.