Subprime Mortgage Crisis Enabled by Alan Greenspan

Federal Reserve Belatedly Reverses Greenspan and Proposes Tighter Mortgage Rules

Yesterday, Ben Bernanke reversed the Fed's position under Greenspan and proposed tighter mortgage lending rules, stating that " Unfair and deceptive acts and practices hurt not just borrowers and their families but entire communities, and, indeed the economy as a whole. The proposed regulations won't take effect for three months after a public comment period and they don't provide any relief whatsoever for the 3 million homeowners who face foreclosure in the next couple of years. .

Further, mortgage foreclosure counsellors claimed that the proposed rules don't go nearly far enough. For example, pre-payment penalties are not eliminated until after 5 years, thus foreclosing the opportunity for a subprime borrower whose credit improves from re-financing their mortgage at a lower interest rate. Although the regulations may not go far enough, had they been adopted 5 years ago as the housing bubble became evident, they might have prevented or blunted the present crisis. The Fed is proposing to lock the barn door after the horse has been stolen.

http://www.nytimes.com/2007/12/19/business/19subprime.html?_r=1&hp&oref=slogin

Greenspan

Alan Greenspan "Blew It" on Mortgage Crisis

Alan Greenspan's denial of the existence of a housing bubble and his refusal to do anything about shoddy subprime lending practices illustrates the folly of putting a dogmatic libertarian worshipper of Ayn Rand in charge of a key government regulatory agency. Edmund L. Andrews reports in today's NYTimes (12-18-07) that Greenspan ignored repeated warnings on the dangers of subprime mortgages from Federal Reserve governor Edward M. Gramlich nearly seven years ago, in 2001 from senior Treasury Department official, Sheila C. Bair, and from leaders of a housing advocacy group in California, John C. Gamboa and Robert L. Gnaizda who warned that deception was increasing and unscrupulous practices were spreading. "He never gave us a good reason, but he didn't want to do it (press lenders to adopt a voluntary code of conduct). He just wasn't interested."

Greenspan's position was that the benefits of enabling more people to own their own homes outweighed any downside from the deceptive practices. More recently Mr. Greenspan has been on the defensive, stating that the Fed was ill-equipped to investigate lending practices. Here's a link to Edmund Andrews article:

http://www.nytimes.com/2007/12/18/business/18subprime.html?_r=1&hp&oref=slogin

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Comments 5 comments

William F. Torpey profile image

William F. Torpey 8 years ago from South Valley Stream, N.Y.

The Federal Reserve is supposed to be independent from the presidential politics, but Greenspan obviously protected the Bush Administration whenever it was threatened. Housing wasn't his only failing. Neither was Social Security. Greenspan was questioned hard by several Congressional committees, but he always talked in circles -- and the right wingers let him get away with it! Another great hub, Ralph.


Ralph Deeds profile image

Ralph Deeds 8 years ago Author

Very true. Thanks for your comment.


MrMarmalade profile image

MrMarmalade 8 years ago from Sydney

Ralph you have put the whole scam beautifully.

Presumably you have seen out second largest Supermarket shopping areas.

They own manyshopping centres in Australaia and some 600 in USA.

Not good.

Thank you.

Thank you please have a great Christmas and the best New Year for 2008.Are you interested in this, no offense intended. Here are three books on Sudoku:- 1. Killer Sudoku 2. Kakuro 3. Junior Sudoku All on CD ROM and with 256 Page book Giving rules and how to play Buy all three of the great puzzles on Sudoku Uanditogether will endeavour to get them to YOU before Christmas Day. That is $AUD 15.00 Each The Postage will be only $8.00 for all three CD’s and three books Across Australia.


Ralph Deeds profile image

Ralph Deeds 8 years ago Author

Thanks, and Merry Christmas to you. I do crossword puzzles. Never tried Sudoku. Maybe next year. Shopping centers have helped kill our inner cities.


Mortgage Advisor 8 years ago

Blah...tighter rules. Individuals get 30 years for fraud and large $ fines how about the same pudding for the goose as the gander gets!

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