Greenspan’s Gaff?

Sam Sherraden — Wed, 09 Apr 2008 16:36:00 -0400

Alan Greenspan wrote in Monday's Financial Times that he was blameless for the development of the real estate bubble, echoing his dismissal of blame during the popping of the tech bubble. Greenspan is right to point out that the ability of regulators to foresee crises are exaggerated and housing bubbles in other countries have risen despite tight monetary policy. However, he is wrong that tighter monetary policy, further regulation over both mortgage lending and complex financial instruments would not have helped slow soaring housing prices. As Martin Wolf points out in his column linked below, a rise in interest rates of 1% would not lead to market collapse if people expected their houses to rise in value by 10%.

Alan Greenspan - The Fed is blameless on the property bubble
Martin Wolf - Why Greenspan does not bear most of the blame
Desmond Lachman - The Economic Consequences of Mr. Greenspan