Greenspan Confesses (Sort of)

Posted by: Chris Palmeri on September 14, 2007

Former Federal Reserve Chief Alan Greenspan has told 60 Minutes that he “didn’t really get” that the huge surge in subprime lending was significant enough to hurt the economy until very late in 2005, according to the news service Levine Breaking News.
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Greenspan told corresponent Leslie Stahl he knew that homebuyers were getting loans with ultra-low adjustable interest rates that would rise quickly soon after, but he didn’t think they’d blow up to the degree they ultimately did. “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 said. “I really didn’t get it until very late in 2005 and 2006.” The appearance, airing on CBS on Sunday, Sept. 16 is Greenspan’s first major interview. He’s out promoting a book, of course. His “The Age of Turbulence” is to be published the next day.

Reader Comments

Christine

September 14, 2007 8:30 PM

RE: “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 said. “I really didn’t get it until very late in 2005 and 2006.”

This is sort of indicative of his intellectual isolation, isn't it? A lot of other people saw it coming.

Ames Tiedeman

September 14, 2007 10:05 PM

The bubble is huge, yes. But keep in mind that these bubbles are regional. Look at how well places like Austin, Texas, are doing. We have never had a national housing collapse except during the Great Depression. Regions like San Diego that have been hit and will fall further will be much higher in the next 10-15 years. A bubble yes, but opportunity awaits.

Jim D

September 17, 2007 12:59 PM

So much for the "evil genius" theory of Fed management. Let this be a lesson to all the folks who thought this was all part of the plan - "Never ascribe to malice, that which can be explained by incompetence".

Lord

September 17, 2007 2:28 PM

He did see well enough to head off the agencies though. The funniest was when he spoke of arms, he was speaking of firearms not loan arms, or is someone spoofing him?
Was he really that badly misunderstood?

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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