"It's a difficult situation, there is an enormous overhang on the real estate market," Greenspan was quoted as saying [on Friday]. "Many buildings which just have been finished can't be sold ..."
"So far, prices have dropped only slightly. But it was enough to cause alarm around the world," he said. "Prices are going to fall much lower yet."
. . .
"There is no doubt about the fact that low interest rates for long-term government bonds have caused the real estate bubble in the United States," he said.
"The Federal Reserve began a series of interest rate increases in 2004. We were hoping to bring the speculative excesses in the real estate sector under control. We failed. We tried it again in 2005. Failure," he said.
"Nobody could do anything about it, neither us nor the European Central Bank. We were powerless," he said.
Friday, September 21, 2007
"We Were Powerless"
Posted by Harriet at 10:35 PM
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2 comments:
"What's that got to do with the price of tea in China!"
Its an old saying my grandmother use to say. Well, we could probably find a correlation between the the square footage of concrete sidewalk in front of a SFH to the ratio of price increases of tea taking into account the loss of product from the Boston tea party.
"They were powerless", no they did not care in my opinion. I also did not "care" about the run up either. I was looking to buy, but I thought it was humorous that others would pay the prices they paid.
Its not a world of the "haves" and "have nots" anymore. Thats too simple a classification, a boolean 1 or 0 mentality. Maybe the feds were were trying to financialy separate the people who would buy using a 80/15/5 to get them out of the "gene pool".
Greenspan is really working overtime trying to save his reputation at this point. I am not sure it is going to do him much good.
The fact is that when he left the Fed interest rates were still near all time lows and he hadn't done a thing to try to address falling lending standards. How can he possibly believe that they did everything they could but that they were "powerless" to stop it.
Sorry, but incomprehensible fed-speak about "froth" and a couple percentage points worth of interest rate increases is hardly the extent of what they could have done.
I think what he is really saying is:
"I did everything I could without upsetting anyone. If I had pushed for tighter lending standards or raised interest rates up to historical levels people would have been upset and I didn't want to upset anyone. "
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