There is a cast of villains that led to the near-collapse of the global banking system.

Republicans blame Bill Clinton for “relaxing” controls on Fannie Mae and Freddy Mac, although, with perfect consistency, they were happy to relax controls on retail banks that allowed them to become one vast punt on the housing market.

Democrats blame Clinton, too, because he signed the bill that let it happen. The regulators didn’t much believe in regulation and industries such as mortgage broking and the ratings agencies were given over to shonks and fraudsters.

Almost all got away with it. After the savings and loans crisis of the 1980s there were 2000 prosecutions. The global financial crisis (GFC) has so far delivered Lee B. Farkas. That’s it; a parsimonious crop indeed.

The GFC wasn’t the fault of Farkas. If anyone’s to blame, it’s the man formerly known as the world’s greatest central banker, Alan Greenspan (Time Magazine placed him third, behind Angelo Mozilo and Phil Gramm).

No matter what the problem — from crises in Mexico and Argentina to the collapse of LTCM, the dotcom crash and 9/11 — Greenspan’s response was always the same: make money cheaper.

In the short-term it worked. Everyone rode the booms, waiting for Greenspan to walk down the steps of the Federal Reserve waving cheap money at the first sign of trouble. Traders, brokers and fund managers rejoiced. There was now a floor to foolishness and no gate on greed.

Like Greenspan’s mentor Ayn Rand, The Greenspan Put turned out to be a false god. In preventing crises over the short term, the inevitable long-term crisis was made worse. Excessive risk taking wasn’t curtailed; misallocation of capital wasn’t punished; and salutary periods of slow or negative economic growth, which can rid the system of bad debts, didn’t happen. The Greenspan Put became one giant IOU to the next recession.

By the time it fell due, Greenspan was gone. His replacement, Ben Bernanke, lowered interest rates and set printing presses rolling. Whereas Greenspan had underwritten Wall Street profits, Bernanke underwrote their debts.

What the US banking system should have written off in bankruptcies and defaults was worn by the foreclosed, the unemployed and ordinary taxpayers. The profits of the boom went largely to the exceedingly rich; the pain of the collapse was to be shared.

The result is a more fragile environment than almost anyone cares to admit and a policy bind unlike any other in contemporary US economic history. Two of the most powerful weapons in the US government’s arsenal are a spent force.

US interest rates are so low that borrowing is effectively free. And yet investment, in a textbook definition of a liquidity trap, remains unresponsive. Corporations are sitting on huge capital sums and ordinary Americans, worried about the future, are saving in an almost un-American way. The financial system is awash with cheap money but banks don’t want to lend and customers won’t or can’t borrow. Greenspan’s legacy has been to render monetary policy utterly ineffective, a real-life case of “pushing on a string“.

The Keynesian weapon of government spending is also challenged, and not just by Republicans. Five years ago, US debt stood at 63% of GDP. It’s now 93%. The US probably won’t default — in World War II debt grew to 122% of GDP — but if enough people come to believe it, financing the deficit will become more costly, perhaps debilitatingly so. At least there’s a good excuse to abolish all those wasteful welfare programs now.

The US hasn’t been here before but Japan has. After the bursting of its property boom the government reduced interest rates to near-zero and indulged in massive pump priming. The systemic bad debt was never expunged and a 20-year recession ensued. Government debt — 220% of GDP — is now the highest in the developed world and a recovery seems as distant as ever. To avoid that fate the US is actively encouraging inflation, flooding an economy with printed money.

Rarely does that end well. It is, after, all a stretch to imagine how the solution to the problem of cheap money is to make money cheaper and debase its value.

Millions suffered during the GFC; very few profited from it. One that did was hedge fund manager John Paulson. In 2007, in what’s known as The Greatest Trade Ever, he bet against subprime mortgages — an industry unlikely to exist without Greenspan — and made $15 billion.

The egregious symmetry of the GFC — those that carried the pain reflected in the pockets of those that carried off with the money — was nicely established when Alan Greenspan started work for Paulson in January 2008.