Posted on 09/13/2007 10:28:30 AM PDT by Froufrou
Former Federal Reserve Chairman Alan Greenspan admits he "didn't really get it" that the subprime lending trend was significant enough to hurt the economy until very late 2005, but still defends his lowering of interest rates from 2001 until 2004 that critics say caused the crisis in the first place.
Greenspan, who led the U.S. Federal Reserve Bank through 18 years and four presidents, speaks to Lesley Stahl in his first major interview, to be broadcast on 60 MINUTES Sunday, Sept. 16 (7:00-8:00 PM, ET/PT) on the CBS Television Network.
Greenspan says he knew about the questionable subprime lending tactics that gave loans to homebuyers and investors with low adjustable interest rates that could rise precipitously, but not the severe economic consequences they posed. "While I was aware a lot of these practices were going on, I had no notion of how significant they had become until very late," he tells Stahl. "I really didn't get it until very late in 2005 and 2006."
Even though one of the Federal Reserve governors raised a red flag on those lending practices, Greenspan says there was little he could do. "Well, it was nothing to look into particularly because we knew there was a number of such practices going on, but it's very difficult for banking regulators to deal with that," says Greenspan.
Several of Greenspan's former Federal Reserve governors have since said that Greenspan's policy of lowering interest rates for three consecutive years early in the decade was wrong because it opened the door for the subprime lenders. They think he kept rates too low for too long. "They are mistaken," Greenspan tells Stahl. "It was our job to unfreeze the American banking system if we wanted the economy to function. This required that we keep rates modestly low," he says.
Some believe today's market slide -- U.S. stocks have lost significant ground over the past few months -- could have been slowed had the current Federal Reserve Chairman Ben Bernanke lowered interest rates like Greenspan did early in the decade. Would he act as dramatically and quickly now as he did then if he were the current chairman as some believe? "I'm not sure that's true," says Greenspan. "We were dealing in an environment back there where inflation was easing. We could have acted without the fear of stoking inflationary pressures. You can't do that anymore... I'm not certain I would have done anything different [if he was the chairman today]," he tells Stahl. "I think [Bernanke] is doing an excellent job."
YEAH, Greenspan caused this crisis.....not stupid, ignorant people that borrow more than they can possibly afford...
If we didn’t have so many %&@^&!$^&*! “undocumented citizens” there wouldn’t be a need for subprime loans.
@$&@$^*@*@*
[thanks for letting me vent!]
Who is this guy trying to kid? The major indices are maybe 4% below the highs of two months ago. The DJII has swung that much in a week two or three times since then.
I thought it was his job to know these things. Evidently it was just his job to raise and lower interest rates. “Hey Tom, Dick, Harry and Sue, come on down. You are our next contestants for Federal Reserve chairman for the next year.”
DJIA Today: 13,462
YTD change: +828.51
Got bias?
You call that a vent? Drop and give me five paragraphs, soldier!
I can remember when I was a loan officer everyone would hold their breath when the Fed would meet. He was sooooo respected.
One couple didn’t understand that defaulting on a student loan [college, at that!] pretty much meant you couldn’t get a FannieMae or an FHA loan.
I was “like, what part of government insured don’t you get?”
This has become a nation of privilege. Everyone thinks they’re entitled to everything.
This begins with illegals wussing out about deporting them when they have American citizen babies which our tax dollars paid to deliver.
The 14th Amendment blows. It needs rewriting almost as much as Roe v. Wade needs abolishing. To he[[ with stare decisis!
Greenspan caused this crissis...not stupid, ignorant people that borrow more than they can possibly afford.”
Yes, some of these people were stupid and ignorant, but what about the greedy, immoral lenders who didn’t give a s*** when they gave loans to people they could probably guess would not be able to afford the bump up a few years later? I am generally in favor of deregulation, but apparently, after Enron, etc. and this sub-prime crisis, maybe we need to rethink how we implement deregulation, and what limits and requirements we have to leave in place, especially if we the taxpayers are going to have to bail out both the rich and the poor.
I love all this second-guessing of Greenspan’s actions. If you see monetary policy as an aid to maintaining a growing economy in the absence of inflation, where’s the bitch? If you want something to bitch about, go back to the Carter years and a 21% prime interest rate.
No arguement there! I remember paying %14 on our first house!
Qualified borrowers don’t get in trouble with interest only loans, either.
What a yutz. What did he think lowering the FF Rate to 1% would do?
Low interest rates didn’t permit abuse, relaxed underwriting standards and very lax enforcement of those relaxed standards did, in combination with so many “innovative” loan products. Overreliance upon FICO scores with no further verification was and is another weakness.
I do not know about you, but when I put my name on ANY document, you can bet your a$$ that I have read every word, and questioned everything that I either did not understand, or makes no sense......I personally know scores of people who sign anydamn thing someone shoves in their face...that makes it THEIR problem if they sign a document with the capability of screwing them...sorry, no more excuses, people are responsible for their own financial security...my favorite saying is “ Ya write your own ticket, now live with it”...
:sorry, no more excuses, people are responsible for their own financial security...”
No, we the taxpayers end up taking care of people’s financial security. Perhaps you don’t remember the Savings and Loan scandle some years ago. Also there is a Pension Guarantee Program we pay for that rescues people who have been scr**** by their employees. Trust me, you and your children are and will be paying for all the individual lack of responsibility as well as that of those who really are educated enough to know better, except perhaps in the area of ethics and morality.
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