Greenspan: The Fed is Blameless

[Maurice]

Greenspan op-ed in yesterdays FT: (forgive me if this has been posted already)

FT.com / Home UK / UK - The Fed is blameless on the property bubble




Meanwhile today Greg Ip has a piece in the Journal about Greenspan defending himself.

This is great:

Quote:

He chuckles at political cartoons, such as one likening his recent memoir, "The Age of Turbulence," to O.J. Simpson's "If I Did It."

Missed that cartoon.

Anyway, here's the Ip piece:


His Legacy Tarnished, Greenspan Goes on Defensive - WSJ.com

[Milton]

Yes, I saw that FT column. Beats me why they continue to give him a platform.

[Milton]

Quote:

Originally Posted by Maurice Missed that cartoon.

Here you go: The Cartoonist Group - Image View and Uses

[FinanceDude]

I think Bernanke is cleaning up Greenspan's "messes"..........wasn't Greenspan the guy who "moved too fast" and made the tech wreck worse, then overreacted after 9/11 and cut rates to the bone.........seems to me he made PLENTY of errors.............

[brewer12345]

I think Bernanke was way too tentative and slow in responding to the market turmoil last summer. Its reasonably clear that the "real" economy is worse off than it had to be had not the Fed been so slow to respond.

As for Greenspan, I wish he would shut up.

[W2R]

Quote:

Originally Posted by brewer12345 I think Bernanke was way too tentative and slow in responding to the market turmoil last summer. Its reasonably clear that the "real" economy is worse off than it had to be had not the Fed been so slow to respond. As for Greenspan, I wish he would shut up.

Sometimes I wonder if Greenspan's constant yammering and books, talk shows, and such is an attempt to psychologically complete the transfer of power. He was in charge for such a long, long time that for some it may have been difficult to stop hanging on his every word or thinking that he was working with Bernanke behind the scenes. But by blathering, he is taking the fact that what he says no longer matters, and shoving it in our faces.

Bernanke is doing OK, I guess, though I will not feel sure of that for another year or two. I wouldn't want to be in his shoes.

[FIREdreamer]

Quote:

Greenspan: The Fed is Blameless

What else is he supposed to say? If the Fed is to blame, then he is to blame too...

[Razor]

Should the government react to market turmoil in a free market system?

[brewer12345]

Quote:

Originally Posted by Razor Should the government react to market turmoil in a free market system?

Dunno about the gummint, but that is exactly what the Fed was created for.

[Notmuchlonger]

Hindsight is 20/20 .

[Razor]

Quote:

Originally Posted by brewer12345 Dunno about the gummint, but that is exactly what the Fed was created for.

The FED is part of the Government. The president appoints it's leader. So all those that say free markets work and the market will always work itself out are full of baloney?
I think the FED is partly to blame for the mess in the first place.

[brewer12345]

Quote:

Originally Posted by Razor The FED is part of the Government. The president appoints it's leader. So all those that say free markets work and the market will always work itself out are full of baloney? I think the FED is partly to blame for the mess in the first place.

Yes, they are full of baloney. Happy to sort that out for you.

[maddythebeagle]

Greenspan=the bubble boy

[Milton]

Another article: FT.com / Columnists / Martin Wolf - Why Greenspan does not bear most of the blame.

Quote:

Why are so many Americans determined to blame Mr Greenspan for the mess? I can see three reasons. One is that it is far more painful to admit that the US was, in large measure, the victim of circumstances beyond its control. Another is that it is far easier to complain that the Fed made us do things we now bitterly regret than take responsibility for one’s own mistakes. Last, the more one can blame the Fed, the more reasonable become demands for bail-outs now flooding into Washington.

[barbarus]

Greenspan is a major enabler of our current economic disaster, but by no means the sole perpetrator. He is like the man that supplies the gun and ammunition for a murder.

Future generations will curse him in his grave, as they will Bernanke, and he knows it, and it bothers him desperately.

His reputation(and millions of dollars and worldwide fame) are all he has left.

[DblDoc]

Fed Chairman has to be the ultimate "damned if you do", "damned if you don't" job. Did Greenspan's Fed decisions enable the current crisis yes. Was it foreseeable? I'm not so sure. I lay the blame at greedy hedge fund managers looking for higher return, a lending industry ready, willing and able to create it and borrowers not doing due dilligence or greedily thinking they were going to make a killing in RE.

DD

[Hamlet]

Here's an article from 2004 that contains Greenspan's worst advice to American homeowners:

USATODAY.com - Greenspan says ARMs might be better deal

"American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage," Greenspan said.

Oops.

[brewer12345]

Quote:

Originally Posted by Hamlet Here's an article from 2004 that contains Greenspan's worst advice to American homeowners: USATODAY.com - Greenspan says ARMs might be better deal "American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage," Greenspan said. Oops.

Actually, he is correct. ARMs and hybrid ARMs (5/1, etc.) generally provide lower all-in costs vs. 30 year fixed loans. What happened is that people went nuts with their mortgages. For those with a smidge of discipline and common sense (a depressingly small portion of the Merkin population), ARMS are in fact a better choice.

[mbooth]

Quote:

Originally Posted by brewer12345 Actually, he is correct. ARMs and hybrid ARMs (5/1, etc.) generally provide lower all-in costs vs. 30 year fixed loans. What happened is that people went nuts with their mortgages. For those with a smidge of discipline and common sense (a depressingly small portion of the Merkin population), ARMS are in fact a better choice.

Well yeah, we can claim the un-sophisticated masses jumped at the situation, up to a point. But wasn't it the packaging and 'on-selling' of the 'leveraged' debts several times over, before they became payable, into the amorphos 'derivitives' market that has really caused the financial meltdown?

To me this is sophistry and 'creative accounting' at it's best/worst

At the end of the day, the uber-smart 'investment' bankers got waaaaay too creative and wealthy, and the regulators let them. The mug-punters and the rest of the 'innocent' world are now suffering for it.......including my hard-saved for retirement nest-egg

Disclaimer: I'm not a Merkin, but my local (Aussie) stock-market and financials are suffering mightily because of this practice (no doubt our own local uber-smarties jumped on the bandwagon to some lesser extent due to our tighter banking laws. But our economy is going gang-busters, still we are suffering from this financial-fancy-footwork).....America sneezes, the world still catches a cold

[Hamlet]

Maybe an ARM is historically a cheaper choice, but over the last 5 years they seemed pretty risky to me. I remember the rate difference between a 5/1 ARM and a 30-year fixed was pretty low when I bought my house in 2005. It's pretty tiny right now.

I just don't think the tiny interest savings are worth the risk of a spike in rates.

One of the big advantages of a 30-year fixed mortgage is that it turns your biggest expense into a giant inflation hedge. If rates actually plummet, you can refinance. I think its crazy to give that up for less than .5%

It just seems funny that Greenspan was encouraging everyone to get more creative with their home financing at the very time they should have been getting less creative.

Quote:

Originally Posted by brewer12345 Actually, he is correct. ARMs and hybrid ARMs (5/1, etc.) generally provide lower all-in costs vs. 30 year fixed loans. What happened is that people went nuts with their mortgages. For those with a smidge of discipline and common sense (a depressingly small portion of the Merkin population), ARMS are in fact a better choice.