Greenspan: Mortgage Debt May Be Threat

[rodbarnett]

WASHINGTON - Mortgage giants Fannie Mae and Freddie Mac could pose a threat to the country's financial system if their debt is not restrained, Federal Reserve (news - web sites) Chairman Alan Greenspan (news - web sites) said Tuesday, urging Congress to consider capping the debt the two Fortune 500 companies can carry.

Greenspan said that the two institutions, popularly known as Fannie and Freddie, have grown to be among the largest financial institutions in the United States and now stand behind $4 trillion of home mortgages, or more than three-fourths of the single-family mortgages in the United States.

Greenspan said he believed both institutions have managed their financial risks well to date, but he said that he believed risks would rise if the two institutions allowed their debt levels to grow in the future without any restraints.

He said that "future systemic difficulties" could be considered likely and he urged Congress to take action "sooner rather than later."

With his testimony before the Senate Banking Committee, Greenspan put his considerable influence on financial matters behind a growing effort to overhaul the two institutions, which financial competitors contend have become too big and now threaten the security of the financial system.

http://news.yahoo.com/news?tmpl=story2&cid=509&u=/ap/20040224/ap_on_bi_ge/greenspan_mortgage_giants_2&printer=1

comment : hey alan, i thought america's balance sheets were in order yesterday! amazing what a difference a day can make!

[DiverDave]

1. Jeez alan

YA THINK??

Jeez, I wish you would just stick to the administration message.

[GOPisEvil]

2. Make up your mind Alan...is debt GOOD or BAD?!

Criminy...

[CaptainClark23]

3. Greenspin out to pasture

He's spun himself so much he no longer has any idea what he's supposed to be doing.

Mac n' May are in trouble? And that's bad?

No shit alan...go take your medicine now dearie....

[UpInArms]

4. does Greenspin have alzheimers?

he can't seem to retain short-term memories (like yesterday's speech) where he was saying that the asset value of homes was the country's greatest strength.

I say he needs to be kicked to the curb.

[llmart]

5. Get rid of him.

Howard Dean was the first (and maybe the only) Dem candidate who said Greenspan should go. He's been instructed by the Bush cabal to tow the party line, but the masses aren't buying his BS.

[ignatius]

6. His appointment is up in June of this year. I just swa that

Bush is going to reappoint him. For God's sakes, why wouldn't he? Greenspan is totally under the gop reichwing control.

Remember under Clinton it was balance the budget, rates will go down and we will prosper. He did, they did and we did. Then suddenly, in March of 01, he did a 100% about face and said tax cuts were a good way to give the taxpayer back the surplus.

The man is 78 years old, he needs to be retired with a gold watch. But I suspect he and Andrea have made tons of money from his tenure.

[myopic4141]

7. Debt

Everyone seems to only look at segments of this nation's debt rather than the nation's debt as a whole. The combined debt (government, commercial, and private) is known as "Credit Market Debt" (CMD). Information on this debt can be found in the "Statistical Abstract of the US" at http://www.census.gov/statab/www/. The tables of interest are located in the banking and income chapters. The latest edition is 2003 covering the 2002 statistics (published in Sep of each year for the previous year).
My interest in CMD came about from a 1990 article in Forbes where the author tried to make an argument that the CMD under Reagan administration was the same as the CMD under Kennedy/Johnson administrations following a tax cut by each. That did not sound correct, so I did some research and found that the author included mortgage debt (government, commercial, and private) in the Kennedy/Johnson years; but, not in the Reagan which skewed things. There was an aside mentioning concern over the mortgage debt; but, was never made a factor in the article.
Some of what I learned from the latest abstract. In 2001, the last year of a Clinton budget, GDP rose 2.62%, GNP rose 2.60%, US Government Debt (USGD) declined 0.15%, and CMD rose 7.48% from the 2000 values. As a result, CMD as a function of GDP rose from 278.37% in 2000 to 291.54% in 2001. In 2002 (the first year of a Bush budget), GDP rose 3.61%, GNP rose 3.29%, USGD rose 7.60%, and CMD rose 7.85% to 303.48% as function of GDP. GNP as function of GDP went from .24% in 2000 to .22% in 2001 to -.09% in 2002 or from a trade surplus to a trade deficit after Bush's budget took effect. The conclusion is that Bush's tax cut from 2001 did not have much of effect in 2002 other than raise the USGD and increase the trade deficit. It also should be noted that during the Clinton years of USGD decline (-1.39% in 1998, -1.89% in 1999, -8.04% in 2000), GNP significantly rose (5.75% in 1998, 5.61% in 1999, and 5.93% in 2000). Buying down debt would appear a better solution than a tax cut to stimulate the economy because the government infuses money into the private sector without entering into competition with the private sector to borrow money.

[Johnyawl]

9. I'm not an economist, but...

...isn't this why the Clinton tax raise stimulated the economy?

Buying down debt would appear a better solution than a tax cut to stimulate the economy because the government infuses money into the private sector without entering into competition with the private sector to borrow money.

[nolabels]

10. Hi myopic4141, welcome, welcome

Did you just type all that in? I can understand what you are saying here I think. This would be the assumption, somewhat, that government doesn't produce crap, and acts more like a heat sink to keep the economy from getting too overheated.

Debt as were, seems to me bad, when it grows and has no way of overcoming a spiral of its self

Most people probably take issue with the way distribution of the proceeds from production take place, would be my guess

[ProfessorGAC]

8. Good Catch! This Is The Opposite Of What He Said Monday

This guy is really a piece of work. He obviously doesn't understand the differences between finances and economics. He thinks they're one and the same, and they're not.

To top it off, he contradicts himself 24 hours apart.

Come on, Al. Get your story straight.
The Professor

[slothrop]

11. yes I was going to mention that

I thought houshold finances were in fine shape, is that not what we heard just a few hours ago? These people either have a low opinion of my memory or they are themselves just spewing out whatever crap suits the moment.