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Why Do We Listen to this Man?

Posted by: Chris Palmeri on August 1, 2008


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.

Reader Comments


August 4, 2008 4:55 AM

Even though Greenspan has been wrong at times, we listen to him instead of Palmeri because Greenspan is not a two-bit journalist doing Monday night quarterbacking while writing amateur economic analysis. Greenspan is in the "thick-of-the-game" and he is not afraid of calling it as he sees it, whereas a journalist without economic understanding and without market perception stand idly by but ready to pounce when things do not go according to plan. While Greenspan never claimed to be the oracles of anything, Palmeri's three paragraph is an oratory that elevates his own importance above Greenspan while devaluating Greenspan's judgment. Writing "I attended a private briefing with then Fed chairman" Palmeri wants to impart to readers that he has attained a privileged status to a level where he, Mr Palmeri, has the credibility to criticize Greenspan. Having self annointed and appointed with supreme authority, Palmeri found Greenspan responded to his question about Mexcio's economy "in his own obtuse way...." Next, Palmeri literally took Greenspan's comment that Mexico has a healthy economy when in fact Mr. Greenspan was merely responding politely and positively as he would to anyone who resembles a Paparazzi. Not being accustomed to diplomatic etiquette, Palmeri is not aware that Mr. Greenspan does not enjoy swatting flies in public. As to the collapse of the peso, the Federal reserve monetary policy did not fail or drive the peso collapse. On the contrary, in an emergency night meeting requested by Mexico's representatives, Mr. Robert Rubin met with the Federal Reserve commitee and Mexico's representative to discuss peso support. Despite the continuous repeated attack on the peso by international financiers, Mr. Rubin and the Federal Reserve elected to hold fast and repeatedly bought over $20billion of peso over the course of one week. The peso strengthen and the financiers fled. At about a year later when the peso value reached new height, Mr. Rubin with consultation with the Federal Reserves sold their peso accumulations for over $100million profit for the American taxpayers. For the record, this is the only time ever in US history where the joint efforts of US Treasury and Federal Reserve, under the leadership of Mr. Robert Rubin, earn that quantity of money for the American taxpayers with such ease. Once again Palmeri either failed to do his research or tell the entire story. This article shows that Mr Palmeri has a superb repertoire of knowledge in a subject he has little expertise. We readers are confounded as to why Mr. Palmeri elected to demonstrate his lack of virtuosity in his so called journalism. In an ironic twist, perhaps Palmeri was referring to himself when he titled his article, "Why Do We Listen to This Man?"


August 6, 2008 11:36 AM

Great post Chris! Alan Greenspan has lost all respect I had for him


September 18, 2008 11:42 PM

Greenspan is a cheat.

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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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