Wednesday, December 26, 2007

Alan Greenspan

Alan Greenspan, ex-Chairman of the Federal Reserve ('87-'06)
Under Alan Greenspan's chairmanship, the Federal Reserve lowered the federal funds rate to a half-century low of 1% in 2003 and 2004 to ward off the threat of deflation: falling prices, falling incomes, defaults, etc. Lowering the funds rate to 1% was like opening a fire hydrant--money came gushing out. A huge amount of it gushed straight into the housing market. Armed with generous mortgage commitments, homebuyers fought over properties in bidding wars that sent prices to the stratosphere. They took on lots of debt and overpaid. When Greenspan & Co. eventually realized that rates were too low, they started raising them. The housing market eventually succumbed to the higher cost of borrowing and the sheer unaffordability of homes. Plausible Suspect in the Housing Bubble

Guilty, as charged:
Greenspan alert on US house prices:
US house prices are likely to fall significantly from their present levels, Alan Greenspan has told the Financial Times, admitting that there was a bubble in the US housing market.

In an interview ahead of the release on Monday of his widely-anticipated memoirs, the former chairman of the Federal Reserve said the decline in house prices “is going to be larger than most people expect”.

2007-12-18: Fed Shrugged as Subprime Crisis Spread
2006-11-07: Greenspan Unconcerned About Housing

2 comments:

Natalie said...

Purva outsourced her brain to Bangladesh. She will return on a cloud of crack smoke, one day.

bart man said...

that is rubbish!