I put Middle Earth Journal in hiatus in May of 2008 and moved to Newshoggers.
I temporarily reopened Middle Earth Journal when Newshoggers shut it's doors but I was invited to Participate at The Moderate Voice so Middle Earth Journal is once again in hiatus.

Thursday, September 13, 2007

Sowing the seeds of successive asset bubbles

I've never been one who thought that Ayn Rand disciple Alan Greenspan was a miracle worker and economic genius. A couple of my previous commentaries can be found here and here. He proved my point today:
Greenspan says didn't see subprime storm brewing
WASHINGTON (Reuters) - Former Federal Reserve Chairman Alan Greenspan said he was late to see the storm gathering around U.S. mortgage lending practices and commended his successor Ben Bernanke's handling of the crisis, saying he would likely be responding in a similar fashion.


Greenspan said that as Fed chief he knew about questionable lending practices that were leaving subprime borrowers with adjustable rate loans vulnerable to harm from rising interest rates, but did not recognize those loans would trigger broader problems until fairly recently, CBS said.

"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," Greenspan said. "I really didn't get it until very late in 2005 and 2006."
He knew about it but didn't think it would be a problem? he's either a liar, an idiot or both. I vote for liar. He knew full well what would eventually happen. As a political hack he also knew full well that the easy credit was the only thing that prevented the economy from going south before the 2004 election and threaten the reelection of George W. Bush.
Greenspan, 81, has received credit for leading the economy to its longest-ever expansion in the 1990s and many economists have praised his handling of a sequence of crises.

Indeed, some have hailed him as the greatest central banker in U.S. history.

However, others criticize Greenspan for sowing the seeds of successive asset bubbles, first in U.S. stock markets and later in housing. He has also come under fire for suggesting during his Fed tenure that adjustable rate mortgages could be a cost-saving financing option for many borrowers, just shortly before the Fed embarked on a long push to move rates higher.

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