He insists that he isn�t, but I don�t believe him, and neither should the Washington Post. The Post had an article on a Senate Banking Committee hearing, in which Chairman Chris Dodd blamed Greenspan for allowing the lax lending standards and exotic mortgages that are at the heart of the meltdown of the subprime mortgage market. The article cites Greenspan�s denial that he had encouraged people to take-out nontraditional mortgages. The immediate point at issue was that Greenspan had suggested in early 2004 that homebuyers often wasted money by taking out fixed rate mortgages. Greenspan claims that he was referring to limited segment of the market and had qualified his remarks in subsequent weeks. Sorry, that one doesn�t pass the laugh test. Greenspan saw what was taking place in the subprime market. There was readily available data showing that this sector was exploding, that mortgages were being issues with zero money down and that many of these mortgages included teaser rates that were sure to reset to considerably higher levels in two to three years. Alan Greenspan knew that his comments, whether misinterpreted or not, contributed to this irrational exuberance. In addition to the regulatory powers of the Fed, he could have used his enormous bully pulpit as the revered chairman of the Fed to warn of the dangers of the situation. Instead, he chose to look the other way, and let millions of low income homebuyers get way over their heads in mortgage debt. This was a conscious decision and any good reporter should know this and tell their readers.
--Dean Baker