But what they perceive as newly abundant liquidity can readily disappear. Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher asset prices. This is the reason that history has not dealt kindly with the aftermath of protracted periods of low risk premiums
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Oops, too late!
Just saw H Paulson on WSJR with Bartaromo,
WHY do I have No confidence in this man.....None!
He towed the company line, he said nothing we haven't heard before.
Everything is Great, some small problems but they will eventually work through the system!
In his mind the Chinese Love us, and there's great things ahead with the Chinese!
Really!
I have always felt that Greenspan has a split personality disorder.
Sometimes he says things which I cannot help but agree with him.
But his actions of the last 20 years are exactly the opposite and have created asset bubbles like none other in history.
"Innovation has brought about a multitude of new products, such as subprime loans and niche credit programs for immigrants... With these advances in technology, lenders have taken advantage of credit scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers... Where once more marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending... fostering constructive innovation that is both responsive to market demand and beneficial to consumers."
-- Alan Greenspan, April 2005
click here
The funny thing about that reconstructed M3 chart... M3 had been soaring but hit a brick wall around April, and has remained flat since then at about $12 billion.
But that's like a dieter who has stopped gaining weight but hasn't actually lost any yet. The dieter recommends more hedge fund blowups!
Greenspan is just another whore
keith . I think it will come out in the wash that Greenspan had no idea about the fraud in lending that was going on or how the appraisals were being inflated .
Alot of people assumed the loans were solid that were being made ,including loan investors and rating agencies .Why there was acceptance of faulty loan models for lending guidelines is the million dollar question .
Now you watch ,any new lending system will have to have fraud checks before the loan can fund .
"Where once more marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately".
True Story-
When I spoke with the Bank Manager of Fremont Bank, he had a nonshalant attitude when he told me Fremont Bank DIDNT CARE about the loans they issued, because "THEY SELL THEM ALL OFF ANYWAY".
There no longer is a neccessity for loan collateral... I can hide my precious stuff in a safe place other than the bank. What are Banks good for besides pimping mortgage and auto loans??
Thanks Greenspan for giving all the institutions the green light to commit fraud.
I hope you're alive long enough to hear the condemnation of your tenure as Fed Chairman.
Anon @ August 13, 2007 5:14 AM is completely full of SHIT. There's no way a man with Greenspan's education and experience would have "no idea about the fraud in lending that was going on or how the appraisals were being inflated". You may as well just say an auditor is unable to audit ... so, why are you paying him, and why are you listening to him in the first place?
The terrible truth is that Greenspan and the rest of the banking elite designed the bust since they designed the boom. They are directly responsible for creating the liquidity and the lax regulatory environment surrounding it, that were so thoroughly taken advantage of across the nation by buyers, sellers, appraisers, lenders and investors.
Greenspan and his ilk are trying to destroy the middle class. Eventually, enough of the middle class will become poor, and will have to ADMIT THIS FACT.
This just shows the Fed can only do so much; they have a limited scope. The housing bubble is quite possibly not all Greenspan's fault.
I thought we were blaming Bush?
I blame the morons who had to have the house no matter what (even though Suzanne did research it).
@peahippo 08-14 07:51
You're right. At least by the time Greenspan left office he knew how the low-interest rate policy and liquidity injections he did c. 2001 through 2003 did to liquidity. Greenspan co-wrote an article entitled "Estimates of Home Mortgage Originations, Repayments, and Debt on One-to-Four-Family Residences" in September 2005 where he calculates the flow of home equity out of housing into the rest of the economy (see http://tinyurl.com/aydhd).
The result of the analysis is that Greenspan calculates about ~750 billion a year added cash -- Effectively, much of the increase in M2 money supply during that period of time.
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