technical question: Greenspan answered my question, I need someone to...

[WhaTHellsgoingonhere]

...help me understand his response.

Snow claims that, "years" ago, he aggressively argued the gravity of the problem to Congress and places the blame at the feet of a Congress that did not act. Fine, I'd expect as much from that Congress.

My question has to do with the Fed, an autonomous entity that acts independent of Congress and the Executive branch. Since the three panelists claim they saw the writing on the wall years ago, clearly the Fed could have acted to discourage lending behavior by raising interest rates, or at the very least freezing them.

Greenspan testified that, historically, when short-term interest rates were adjusted upward, long-term rates would also rise. But then he said, when he experimented with raising rates in 2004, there was a disconect between short-term and long-term rates. In effect, long-term rates were no longer impacted by short term rates. He ended his explanation there.

My question is, why would the disconect Greenspan describes dissuade him from freezing or reversing interest rate policy? That just doesn't seem to wash. Is his answer here so esoteric that it's merely designed to save face at the hearings and buy him a little time?


Edited to read more coherantly

[Hannah Bell]

1. greenspan is a giganourmous liar whose policies at the fed were designed to pump bubbles.

purposefully.

he's also the liar who "fixed" social security under reagan, increasing rates so ordinary people would pay more, creating a surplus which could be borrowed into the general budget, which meant rich people could get tax breaks with less political flack, which gave them yet more money to "invest" in -

bubbles.

long-term, purposeful, bubble-creation, & now is the end-game where some go broke & others harvest the wealth.

"In a depression, money returns to its rightful owners."

[Idealism]

2. His explanation makes me believe that

He is trying to wash himself of this mess. Raising or lowering interest rates is not the be-all of Fed powers or influence over monetary policy. One possibility, if Greenspan is to be believed, is that the lenders simply did not want higher interest rates, as they were making quite a healthy profit on underwritting these questionable loans, and attempted to take the situation in their own hands so to speak and raise capital from other sources.

[WhaTHellsgoingonhere]

3. right, the guy is truly a Swiss Army knife

Great first impression, halo :toast: