Why is Alan Greenspan getting a media pass on the subprime mortgage crisis?

[yellowcanine]

And why isn't Congress hauling his sorry ass in to explain himself?
Wasn't it his leadershop of the Fed that allowed to banks to make so many shaky loans?
It seems to me that Mr. Andrea Mitchell has some 'splainen to do.

[Captain Angry]

1. Leave him alone. He's doing a book tour.

:-)

But really: the Fed just cut rates to a very low level. The Fed does not control the credit rating activity of lenders. If a bank wants to lend you money, it has to decide if it is too risky to do so.

In the past, the bank held that loan, and so they had to be careful. Now they can sell it to somebody who bundles the mortgage loan with 10,000 others. That bundle is then chopped into bonds with different returns. As long as the market worked the way it did before the run up of prices, the mechanism worked fine.

So, in this case, I don't think the Fed can be blamed for this mess. It is purely the banks.

The lower rates certainly enticed people to get into the market. Those rates didn't fool people into getting bad loans, the banks did.

[yellowcanine]

8. They could have punished banks who made too many bad loans by

making them pay more for money. After all, the risk increases for the whole system if the banks are making bad loans so why couldn't they do that?

[Captain Angry]

10. The Fed does not hold oversight over banks.

The banking committees in Congress do.

The state banking regulators who approve the charters do.

The SEC regulates the publicly traded banks.

The Fed only sets the rate that banks lend to each other overnight, and the rate at which they can borrow from the Fed if other banks are holding their money close.

So, the Fed could not say that Chase (as an example) has to pay more to borrow from Citibank than Wells Fargo does. They don't hold that level of control over Citibank and Wells Fargo.

Think of this at the local level. How many tiny banks formed in the last 5 years, solely for the purpose of creating and selling mortgages? No US state was going to say "We're taking the high road, and standing in the way of job creation in this real estate market."

It was greed from top to bottom. But in this particular case, I don't think the Fed can be called out. They screwed up enough other stuff. But not this one.

[yellowcanine]

11. Not directly, no. But Greenspan meddled in areas where he had no formal control.

He even railed about speculators driving up stock prices at one point. He could have indirectly made it more costly for mortgage bankers to make risky loans by publicly taking them to task. Secondary mortgage buyers and banks lending money to the mortgage bankers would have taken note and acted accordingly regarding the risky loans.

[Captain Angry]

12. I disagree. I don't think he had any ability to do so.

His job was to steer monetary policy for the country.

If everybody around you is making money by clapping their hands, at some point, you're going to start clapping your hands. If anybody got cold feet, they just created more business for their competitors.

And the Fed was not in any position to tell a bank in a small town in a small state to stop creating loans which meant new house construction, which meant realtor jobs, retail jobs, property tax revenues, etc.

No, I don't think we can pin the subprime mess on him or the Fed. Now, the disintegration of the dollar is another story. That's all him and Bush.

[redqueen]

2. $$$$$

You scratch my back, I scratch yours.

You know... politics as usual.

[underpants]

3. Cult of personality

it doesn't matter what you do or say it only matters how MACK everyone thinks you are

[electprogdems]

4. because it is never never never

a conservative or a republican's fault. And only Democrats have sex scandals, that the news programs will pay attention to anyway.

[Cha]

5. Because mediawhores are sucked

together in the vortex that needs to be vaporized.

[dmallind]

6. Because monetary policy is a tangential issue here?

It's not that the banks and loan companies would not have behaved the same regardless of feasible interest rate changes. The only way he could have forestalled it would have been to MASSIVELY raise interest rates to dry up available capital - which would have just screwed up the economy directly, and a lot more, than the indirect harm caused by the subprime mess.

[Clanfear]

7. Probably because it has nothing to do with him.

He doesn't legislate lending practices. His weapon is controlling the money supply.

[yellowcanine]

9. Greenspan wasn't shy about issuing warnings about things that he had

no control over - the high price of stocks, for example. I believe his words were "irrational exuberance". So it seems to me he could have indirectly punished the miscreant banks by giving them a public tongue lashing if he had wanted to do so. That would have made the secondary mortgage buyers take note and they would have punished the mortgage lenders by not paying as much for the riskier mortgages. This would have made it more costly to make the risky loans.

[Zorra]

13. Because he is a RW republican, and the media is owned by RW republicans

that do not want to hold their fellow fascists accountable for their failures or their criminal actions.

[Doctor_J]

14. None of the media whores lost their houses

therefore the crisis doesn't exist.

[indepat]

15. Greenspan, a name that will live in infamy

[OHdem10]

16. Corporate Journalists would not be too smart to attack Corporate

Icon.