Sunday, August 28, 2005

Did Greenspan Spawn a Recession?

New York Times columnist Paul Krugman uses the "R" word (recession) in Monday's column as he takes Federal Reserve Chairman Alan Greenspan to task for recent comments cautioning about the inevitable pop of the housing bubble (ok, so Greenspan said "home price increases will slow and prices could even decrease," but we all know this is economistspeak for "this bubble's gonna pop") Krugman's response:
But as recently as last October Mr. Greenspan dismissed talk of a housing bubble: "While local economies may experience significant speculative price imbalances, a national severe price distortion seems most unlikely."

Wait, it gets worse. These days Mr. Greenspan expresses concern about the financial risks created by "the prevalence of interest-only loans and the introduction of more-exotic forms of adjustable-rate mortgages." But last year he encouraged families to take on those very risks, touting the advantages of adjustable-rate mortgages and declaring that "American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage."
Find Krugman's entire column at this link

— The Boy in the Big Housing Bubble