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Former Fed Chief Alan Greenspan sent the stock market into a tailspin this week after declaring home prices were “nowhere near the bottom.” Just a month ago Greenspan said: “The worst is over in the financial crisis or will be very soon.”
Keep in mind that this is also the guy who, during the mid-point of the housing bubble in 2004, declared: “American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage.” That one sentence gave blessing to the wave of toxic mortgages the world is digging itself out from under today.
I have my own emperor has no clothes story about Greenspan. In 1994 I attended a private briefing with the then Fed Chairman. I asked him what he thought of Mexico’s then booming economy. He said in his own obtuse way that Mexico was in great shape and had a very bright future. The very next week the peso collapsed in an entirely federal reserve driven/monetary policy failure. Greenspan & Co. were forced to come rescue the country.
So much for oracles.
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.