A few articles pulled from the weekend linkfest tell the story of how Housing ended up in its present slide and ongoing "challenging" circumstances.
What is frightfully revealing in the entire mess is the role former Fed Chair Alan Greenspan played in the current situation. We have long been a critic of Easy Al, due to his profligacy with money and his tendency to throw cash at any problem. Indeed, we have in the past viewed him as a more of a Cheerleader than a central banker. We even spent time reviewing some of the myths of the Greenspan era. We have long suspected that his halo would tarnish as his role in the current Housing and other messes became more clearly understood by the public.
"Edward Gramlich, who was Fed governor from 1997 to
2005, said he proposed to Mr. Greenspan in or around 2000, when
predatory lending was a growing concern, that the Fed use its
discretionary authority to send examiners into the offices of
consumer-finance lenders that were units of Fed-regulated bank holding
"I would have liked the Fed to be a leader" in
cracking down on predatory lending, Mr. Gramlich, now a scholar at the
Urban Institute, said in an interview this past week. Knowing it would
be controversial with Mr. Greenspan, whose deregulatory philosophy is
well known, Mr. Gramlich broached it to him personally rather than take
it to the full board.
"He was opposed to it, so I didn’t really pursue it," says Mr. Gramlich, a Democrat who was one of seven Fed governors."
There is a big difference between merely being wrong — as everone in the forecasting business frequently is — and corruptly turning a blind eye to inscrupulous if not illegal behavior. It appears that Mr. G. is guilty of both types of malfeasance.
More on this as it develops . . .
Did Greenspan Add to Subprime Woes?
Gramlich Says Ex-Colleague Blocked Crackdown
On Predatory Lenders Despite Growing Concerns
WSJ, June 9, 2007; Page B1
Housing Inventory Build Worsens http://bigpicture.typepad.com/comments/2007/06/housing_invento.html
More Mortgage-Industry Firms Subpoenaed as Probe Expands
WSJ, June 9, 2007; Page A5