Bell Curve The Law Talking Guy Raised by Republicans U.S. West
Well, he's kind of had it in for me ever since I accidentally ran over his dog. Actually, replace "accidentally" with "repeatedly," and replace "dog" with "son."

Monday, March 24, 2008

Greenspan again?

From Reuters: " Former Federal Reserve Chairman Alan Greenspan and other economic experts should determine whether the U.S. government needs to buy up homes to stem the country's housing crisis, Democratic presidential candidate Hillary Clinton will propose on Monday"

I don't really get it. Isn't Greenspan's refusal to admit there was a housing bubble going on earlier partly responsible for this mess now? It seems more and more clear that the mortgage crisis was caused in part by Greenspan's refusal to advocate additional regulation or control, believing that regulation is almost always bad. In fact, I just read (most of) Greenspan's autobiography, and I was shocked to learn that he was an open disciple of Ayn Rand and an avowed libertarian (meaning that, at heart, he really doesn't think of our country as a community with collective problems that need to be solved by collective action). Is Greenspan really going to suggest the US government take actions to help homeowners with their mortgages? Do we trust his judgment on this particular economic issue? The lustre of Greenspan seems tarnished. He's probably more concerned about inflation, willing to have a repeat of 1982 where he (proudly, according to his autobiography) forced a very painful economic recession to tame inflation (and, though he doesn't mention it, supported Reagan's refusal to help the victims of that recession under a libertarian credo).

The idea that Greenspan will calm the markets by his presence or solve economic Gordian knots with his intellect is 1990s thinking.


Raised By Republicans said...

More than that, it's naive hero worship. People proposing this are hoping that putting the people who were in power in the 1990s, like Greenspan, back in power, we can get the 1990s back too.

History Buff said...

I think you're being a little hard on Greenspan. He said that there wasn't a National Housing Bubble but froth in some markets. I would have to agree. Texas and New Mexico are in pretty good shape, it's the North East, California and Florida where all the speculation took place. He also warned about risky home loans back in 2005 (Washington Post).

Back in 1986, during the Savings and Loan crises, the government in the form of the RTC bought up a lot of homes and buildings. Yes it was probably costly, but it worked out pretty well. And if I read the Economist correctly, when governments act in this fashion they can actually make a profit.

Just asking Greenspan for advice is not going back to the 90's.

Dr. Strangelove said...

If Greenspan did recommend that the U.S. government take actions to help homeowners with their mortgages, I think his word would carry a lot of weight with the markets. But if Greenspan denies the conventional wisdom that there was a big national housing bubble, that may sap his ability to reassure the markets.

The Law Talking Guy said...

Actually, housing prices ran up high all over the Southwest, most notably AZ and NV. All over the northeast - from Mass to Virginia - around Chicago, Florida, Atlanta, etc. Almost every major metro area, which is where the vast majority of Americans live.

The sole exceptions HistoryBuff suggests are TX and NM. Hmmm... why could that be? Perhaps because $105/barrel oil is good for only one part of the country: oil-producing TX and nat-gas producing NM. (Would be Louisiana too, but for Katrina).

History Buff said...

I guess what you're saying is that since we all have oil wells in our backyards we didn't need to speculate on housing to make money.

Raised By Republicans said...

Historybuff, that's probably part of it but I think he's also implying that current economic conditions (i.e. massive increases in oil prices) are bad for the economies of most states but very very good for the economies in oil producing states like Texas.

I think it is fairly clear that there has been a massive transfer of wealth from the rest of the country to Texas in the last ten to twelve years. $30 billion or so was sucked out of California (vampire like) when Bush refused to prosecute Enron and other Texas based energy companies for anti-trust violations connected to the rolling black outs in California. And that was just in a matter of a couple of months.

The Law Talking Guy said...

It's not just speculation that caused prices to go up, but people moving to the cities to get jobs, or people with better jobs looking for better places to live. Thriving economic times in oil-rich areas will not see declines in value the same way stagnating or declining economies will.