April 08, 2008

Alan Greenspan, no longer sleeping well and realizing he will forever be blamed for this housing bubble and crash, tries to spin away the blame

Surprising piece in the FT today from Greenspan, where he seeks to refute a critic who blamed him for the housing bubble.

"Housing bubble? Nah, had nothing to do with it" Greenspan essentially retorts.

Well, let's make HP the judge and jury today in regards to Mr. Greenspan and his housing bubble. Here's my list of charges, please add to it:

1) Dropped interest rates too low in a panic

2) Kept interest rates too low for too long

3) Failed to regulate the out of control mortgage lending industry he was supposed to regulate

4) Didn't speak out against the bubble ('oh, a wee bit of froth' cutesy cutesy is not speaking out)

5) Falsely said the Fed could and should do nothing to deflate bubbles

6) Stupidly steered people away from fixed-rate mortgages and into risky ARMs at exactly the wrong time (before he began raising rates), while encouaging the out of control REIC to get even more creative and even more stupid with exotic lending

7) Didn't warn Americans that they could be financially destroyed if they bought a home at a price that was not justified by the fundamentals

Here's Greenspan, approaching his likely date with the gates of hell, futily trying to salvage his destroyed reputation. Too long to print here, but read the whole thing. I did like this one sentence (but Angelo Mozilo won't) - too bad HP'ers knew what was going on and Greenspan didn't. Amazing.

"Could tightened regulation of subprimes have contained some of the reprehensible, and presumably criminal, acts of lenders? Probably. But the broader crisis would likely have arisen even with increased micro-surveillance."


Rich in fl said...

Back in the day when things were running like a german machine or swiss watch. Nothing american made can run this good! I remember greenspan in 2005 raising the rate 16 consecutive times which by the end of 2005 killed the market. I wasn't a member here then because I was too busy and I didn't fully understand what was going on at the time like I do now. At the time I was seeing the change in the market and couldn't understand why they kept continuing raising rates to kill the market. The irony is they need to raise rates now but instead they are lowering them almost every month now. Do you think if they moderated the rate increases and decreases in late 2005 to keep the market going would we be in a different place today?
Rich in Fl

Anonymous said...

Is that old fart Greenspam still alive? WTF?!

BondsOfSteel said...

Personally, I thought Greenspan lost all cred when he backed the Bush tax cuts in 2001.

He clearly understood the difference between yearly budget surpluses and overall debt. But with his wink and nod, we went from budget surplus to spirling deficits.

He talks endlessly about PAYGO... but still supports renewing these same massive tax cuts.

He wants to have his cake and eat it too.

Glenna said...

I thought he lost cred when he raised them half a point just before the 2000 election. He accelerated us into a small recession faster and deeper than it needed to be (compared to what is going on now). He used that as the beginning for lowering interest rates to produce the ownership society to soften the blow of the dot.com bust. This gave the Wall Street losers somewhere to regain their money quick. I used to respect the man but then realized that he was willing to make bad policies for the sake of political agendas rather than what is best for the country (i.e.: Ownership Society of Sheeple; Bush Tax Cuts). He went along with the Bush Admin till early 2004 and realized he was screwed and going to take the fall. Well Alan, you should have thought about it before crawling into bed with Bush's cronies. Reap what you sow. He is a shallow man too after hearing him in interviews, don't know what Andrea saw in him.

Matt C said...

Great interview this week on the Financial Sense Radio with Bill Fleckenstein, author of "Greenspans Bubbles". A must hear and a must read. Dosn't pull any punches!

Daphne64 said...

If he had just allowed halfway reasonable restrictions on loans that would have taken a good 18 months off the bubble and today homes would only be 10% overvalued (on average in the US) instead of 40% overvalued.

That would have made a huge difference in the number of people that walk away from homes and an even greater difference in losses that banks and investors would have faced.

He never has explained his reasoning that a bubble has never by deflated or popped before it's course was run. Does anyone know about bubbles that likely were stopped before they ran the fullest course possible?

Here's a nominee - silver in 1980. Comex squished the Hunt brothers by decreasing their available credit.

Exterminate the REIC said...

Boy is he ugly and stupid too.

America is Dead

brokersleaveyoubroke said...

8) He celebrated SIV's and CDO's as great new financial inovations that would usher in a new era of prosperity.

If you look back many years to Greenspans confirmation hearings he almost didn't get the job because he had a history of making bad decisions and wrong predictions. He never was very smart but Ronald Reagan wanted him so he got the job.

Chuck said...

In his never-ending ideology-driven effort to undo the New Deal and bring back the Gilded Era Greenspan made screwing the American worker the centerpiece of his fiscal policy. His goal was to keep a tight lid on wage growth while doing everything possible to enable wealth accumulation by the rich. He is a Democracy hating whore for the wealthy neo-cons. He and Ronald Reagan should be two of the most reviled figures in recent American history.

Anonymous said...

Very well said. Mr. Greenspan is scum of the earth.

Lady Di said...

He is a failure.

Anonymous said...

Greenspan writes: "Wolf argues that central banks “can surely lean against the wind” even if they cannot eliminate bubbles. I know of no instance in which such a policy has been successful. For reasons I have outlined elsewhere, (American Economic Association presentation, January 2004) I doubt that it is possible. If it turns out it is feasible, I would become a strong supporter of “leaning against the wind.”"


So, he's discounting the work of his predecessor, Paul Volker, the man who took the punch bowl away, causing pain and criticism but leading eventually to a more robust US economy, and no one is calling him on it?

People hated Volker for a while, but he had both wisdom and guts, things Greenspan lacks.

Greenspan is a despicable namby-pamby worm.

Anonymous said...

Go ahead Mr. Greenspan, give us some more of that Ayn Rand philosophical bull bleep. What was the title of one of her books? "The VIRTUE of SELFISHNESS?" Must have been your Bible.

Anonymous said...

He and Ronald Reagan should be two of the most reviled figures in recent American history.


Greenspan yes, Reagan no.

Not only will Reagan go down as one of the greatest American president, he SHOULD go down as such.

Some people have taken Reagan's simple ideology and have twisted it, being men of far less fiber and instinct, like Larry Kudlow.

Giving tax breaks to the rich, "trickle-down" economics, "Reaganomics"...these ideas are not new and are not inherently evil. However, the parasites that attach themselves to such ideology turn it into something evil.

"Mr. Gorbachev, open this gate! Mr. Gorbachev, tear down this wall!"

Come on. Read some history.

Democraatus said...

8. Presiding a bad monetary system, fully aware that it's a bad thing (gold paper 1966).

Anonymous said...

Is it just me or should'nt our government be thinking about making SIV's and CDO's and Dirivitives illegal right about now?

Anonymous said...

Greenspan is a TRAITOR, and should be tried for TREASON !

Greenspan has systematically DESTROYED the elderly's savings over the last 20 years!

Off with his head !

wc said...

Oh he's going to h*ll no question. Nothing he can do about it now. To be fair though - I don't think the $500K tax exemption helped too much either. I know people will be against me on this but they really need to increase it from 2 to 5 years so that it will actually benefit only people that can only afford 1 home - it's way too easy for someone that can afford multiple homes to satisfy a 2 year residency - and if you can afford multiple homes - you can afford to pay capital gains tax at a lousy 15% for basically free money. I work hard for my money and I have to pay 30% for everything I earn.

Anonymous said...

Alan Greenspan is a genuis. What's wrong with you people?

Riddle me this: How would any of you have paid for your $60,000 Escalades with the $3000 spinner wheel options if it wasn't for Alan's free money and home debit card policy? You wouldn't, cause you don't got $63,000 dollars sitting in non retirement saving account, but a whole hell of a lot of you got the Escalades. Where'd the money come from??

You reap what you sow people.

Peter T said...

1-7: good and complete points, Keith. I blame Greenspan especially for 2, 3, and 4.

Lost Cause said...

Yup, he raised the rates to 9% in order to got Bush elected. So what if the internet industry was destroyed in the rocess.